BP is a global company. But although its 19 billion shares are held across the world, the bulk of them are controlled by a mere 150 institutions in just a few cities. These institutions are the asset owners – they own the asset of BP. They then entrust the decisions over their shares to firms of ‘asset managers’. Just twelve of these asset management firms oversee the dominant portion of BP’s stock, and all but one of the twelve are based in London. They include three pension funds, two insurance companies, a bank and five unit trusts.2 In each of these firms only a handful of managers are engaged with thinking about the oil industry. Perhaps less than fifty people across the world are involved with the key decisions around BP’s shares at any one time. These managers are theoretically bound by their own obligations to maximise the interests of the millions of savers, pension fund beneficiaries and insurance policy holders whose money they are investing.
The asset managers in these institutions have to make judgements on a wide array of stocks and shares, and so are guided by internal advisors. For example, at Insight Investment, the asset managers might ask for advice on social issues from Rory Sullivan, Insight’s director of investor responsibility, whom we met on Old Broad Street in The City. They are also guided by external analysts, specialists in the London oil markets. These analysts are mostly attached to banks, and advise the asset managers on whether to ‘buy’, ‘sell’ or ‘hold’ BP shares. They claim to watch the company like hawks, observing its successes and failures, and in particular studying the financial data that it publishes every three months – the Quarterly Results.
These Quarterly Results are presented to the investors and the financial press by BP’s chief financial officer. Four times a year, the CFO gives a half-hour talk, keenly followed by asset managers and oil analysts sitting in BP’s head offices in St James’s Square in London, or listening to it on the webcast.
In spring 2009, the chief financial officer is Byron Grote. This thin American is a heavyweight on the BP board. He has been head of finance since 2002, a long tenure compared to his predecessors. A close colleague of Browne’s since they worked together in Cleveland in 1986, Grote became part of Browne’s ‘clan’ and followed him to London alongside Tony Hayward. Grote was central to the negotiations behind the ‘Contract of the Century’, and in encouraging investors to support BP’s plans to invest $29.5 billion into Azeri offshore platforms and the export pipeline.3 After such an expenditure of capital it is not surprising that BP designated the country a flagship ‘BP Profit Centre’, or that it has had an important place in Grote’s PowerPoint presentations for much of the past decade. Indeed, Grote could be called, like Sabit, one of the ‘invisible fathers’ of this Oil Road.
Grote knows deeply the importance that the asset managers and oil analysts have for the company’s financial Carbon Web. Although they are generally trusting of BP’s management, without their support the company could not have made its advance into Baku. They operate in parallel with the foreign energy policy machinery of departments and embassies that we met earlier. Just as BP drew on the government ministers in the Carbon Web to win the contract in Azerbaijan, the company’s advance into Baku would have been impossible without the support of financial institutions.
At the First Quarter Results presentation of April 2009, the audience will, as ever, be keen for reassurance. We might assume that they will be concerned about Azerbaijan, for in the preceding six months all has not been well in this profit centre. In September 2008 the blowout at Central Azeri only narrowly avoided disaster, when workers spotted gas bubbling on the surface of the sea and were rapidly evacuated by helicopter. The crisis happened barely four months after full oil-extraction targets for the ACG fields were finally reached. The news of the narrow escape by all of the platform’s personnel would have sent a shockwave through Villa Petrolea. In the boardroom senior staff must have gathered in an emergency conference call with directors in London – Bill Schrader, president of BP Azerbaijan, reporting via video link to CEO Tony Hayward and Grote sitting in St James’s Square. Oil production on ACG was slashed by 500,000 barrels of crude per day, causing a weekly loss to income of $350 million.4
At the Quarterly Results presentation in St James’s Square it will be Grote’s task to field any questions from investors on this issue. But none will be forthcoming, as the company has downplayed the crisis on Central Azeri. An investigation by miniature submarine on the seabed found that the leak had resulted from badly executed cementing around the well head. Although this would have been crucial information to the analysts, the company kept it secret in order to maintain investors’ faith in BP.5 A year later it was precisely such bad cementing that caused the Macondo blowout in the Gulf of Mexico, leading to the destruction of 40 per cent of BP’s share value in just two months.
VILLA PETROLEA, BAYIL, BAKU, AZERBAIJAN
As we wait in the lobby of Villa Petrolea, we flick through a magazine from the table beside us – the recent issue of Horizon: The Global Publication for BP People. There is an article celebrating ACG, entitled ‘Scale of the Century’: ‘In Azerbaijan, aside from oil revenues, ACG has created and sustained, over six years, jobs for 15,000 Azerbaijani nationals, training them to international standards . . . The intent of the “contract of the century” was to develop the country as well as the oil.’6
A smartly dressed woman calls us from across the lobby. This must be Irina of the BP Azerbaijan Community Investment Programme – the CIP. She signs us in at the reception desk and we pass through the turnstile.
We climb up three floors. The stairway is wide and airy, light pouring through large windows giving a sense of the sea nearby. Framed photographs of pipeline construction, smiling children in villages and gleaming platforms have been hung on the walls. Soon we are in a corridor on the top floor, among the offices of the senior managers. This is the space where the board of BP Azerbaijan planned and directed construction of both the later phases of those offshore edifices and the Baku–Tbilisi–Ceyhan oil pipeline. We were not expecting to have our meeting up here.
At one end of the corridor is the office of BP Azerbaijan’s president, Bill Schrader. His windows look south over the dark waters of the Caspian, towards the jack-up rigs just offshore. His predecessor, David Woodward, was described as ‘arguably the most powerful man in the “BP Country” of Azerbaijan. BP’s position is so dominant that hardly any important government decision concerning oil is made without Woodward’s (albeit unofficial) consent.’ A BP spokesman once claimed that, if the company pulled out of Baku, the country would collapse overnight.7
Eight doors away, next to a coffee machine, is the office of Tamam Bayatly. For over a decade she has directed BP Azerbaijan’s press and communications strategy, both in the country and abroad. Press, external affairs and community investment offices are all on this corridor. Their proximity to the president illustrates their importance in maintaining BP’s position within Azerbaijan – what companies call their ‘social licence to operate’.
Next to Schrader’s office is the entrance to a conference room; beside it, a heavy steel blast-door that can be swung into place. We are joined by Irina’s colleague, Aydin Gasimov. We sit across the large U-shaped table from the two of them, with our backs to the windows. Microphones and communications tech fill the table; wall-mounted display screens and clocks show the time in London, Houston, Ankara and Baku. We are in the boardroom where that emergency conference call in September 2008 must have taken place.
Irina starts into an account of BP’s Community Investment Projects along the route of the pipeline and near the Sangachal terminal. As she runs through the description of objectives and outcomes, it is clear she has done this presentation many times before, her black patent three-inch heels tapping insistently against the table leg.
‘We conducted a socio-economic survey to find out what the key problems are and where we could see future development interests. Then we started to lay foundations – most of these communities had neve
r seen any development interventions before.’ The programmes were outsourced to international NGOs like Save the Children and International Rescue Committee, eager to take BP’s contracts. Irina explains that these aid agencies focused on ‘mobilising communities: making them understand what community groups can do – how they can solve problems. This was about bringing people together, not constructing physical infrastructure.’ Later, micro-projects included rehabilitating healthcare facilities, renovating schools and constructing kindergartens. Most of these details we have read in BP Azerbaijan’s Sustainability Reports, but Irina is upfront about the company’s motivations behind the CIP projects: ‘The ultimate goal of community investment is to have good relations with communities – ultimately to secure BP’s assets.’ Like the rest of BP’s investments, it is driven by Byron Grote’s fiduciary duty to the shareholders.
After exploring details around pipeline monitoring and the investment programmes, we try to see if we can address some wider issues, with Aydin responding to our questions. He says that the explosion on the BTC pipeline in Turkey in August 2008 did not result in BP making financial losses. ‘No, the large available storage capacity at Sangachal means that we can just export later.’ But we know that if BP cannot export oil via its pipelines, then within a short period they run out of storage at the terminal and have to stop production on the platforms offshore. And if the company is unable to export its crude, it incurs further losses. We ask whether BP routed crude through Russia that month, after its second pipeline through Georgia was shut down due to the war over South Ossetia. The response is firm: ‘I cannot say, I don’t know – I’m not prepared to answer that one.’
When we ask about the blowout of September 2008, Aydin refers to it as a ‘gas release’. We question him further about the other partners in the consortium, such as ExxonMobil and Statoil: Did they fault BP as Operator for this major technical failure? Apparently not, as ‘offshore drilling is very difficult. You are drilling 5 kilometres down and you don’t know what is going to happen. When something happens, it is deep underground – in the oil industry these difficult circumstances sometimes happen. But our partners understand this, so it had no impact on relationships.’8
Maybe sensing that we can see the gaps in his story, Aydin has become visibly more agitated, and pronounces: ‘During our telephone conversation, I said we would talk about the Community Investment Projects. I did not say that we could talk about these political issues.’ It is clear that neither he nor Irina are happy to stray beyond the matters covered in the Sustainability Reports. As with Grote and the investors, the company tightly controls what information it wishes to release, and what to withhold.
Rising from our chairs, we turn to look out the windows behind us before following Aydin and Irina out. The sea glimmers beneath sullen clouds. Much closer, below us, lie several rectangular grey courtyards surrounded by walls and piles of razor-wire. Two men hobble across a yard in shackles, followed by a pair of prison guards.
BAILOV PRISON, BAYIL, BAKU, AZERBAIJAN
To the Caspian
It’s past midnight once again,
And again I cannot sleep, I’m restless.
It’s the waters of the Caspian,
So frightening in the darkness that won’t calm down.
Break down this tower with your waves –
This tower that imprisons us behind these walls.
Drown it with your waves,
This tower that keeps us behind this unbreakable spell.
What is our guilt? What have we done?
You pose the question, for they give me no right to speak.
What did we do to be ashamed of?
You pose the question, for they give me no right to speak.
Ummugulsum Sadigzade, 1937, Bailov Prison9
Ummugulsum, a mother of four, wrote these verses inside Bailov prison. Her husband had been rounded up and executed several months earlier, during Stalin’s Great Terror. As his wife, Ummugulsum was also arrested by the NKVD. During her first four months inside Bailov she managed to collect scraps of paper to document the inhumane conditions of thirty-six women crammed into one cell, and their attempts at resistance. ‘We are continuing our hunger strike. My knees are shaking when I stand up, and green and red flash before my eyes. No one listens to our complaints. No one cares about our grief.’ Finally, though, ‘we decided to eat because, otherwise, we would lose the only thing we had – ourselves.’
It took a further seven years for NKVD prison and labour camps to extinguish Ummugulsum’s life. During her last three years of imprisonment, a young Heydar Aliyev began his steady rise through the ranks of Stalin’s security police. Whether he worked in the prison or not is secret.
Ummugulsum’s treatment in the 1930s and 1940s was not exceptional, but part of a century of state repression directed towards maintaining tight control over Baku’s oilfields. Before coming to power and using the prison for his own ends, Stalin had himself been a prisoner in Bailov – captured thirty years earlier, in 1908, by Tsar Nicholas II’s Okhrana. The prison was intensely overcrowded, with 1,500 people sharing cells built for 400.
Stalin – then known as Koba – and his fellow street-organiser Sergo Orjonikidze protested against the conditions so effectively that the authorities sent a company of soldiers to beat up the politicals. Forced to run the gauntlet, ‘Koba walked, his head unbowed, under the blows of the rifle-butts, book in his hands.’10
The seven months, from March to September 1908, spent waiting for deportation orders to Siberia were filled with intense political debates on revolutionary tactics, the oil industry and visions for the future. Imprisoned in filth and degradation, Koba learned Esperanto and passed the time playing backgammon with Sergo. The politics of the following decades means that we know something about Koba and Sergo’s resistance inside Bailov, while most of their fellow prisoners were consigned to historical oblivion.
Twelve weeks have passed since police cars surrounded Salur Alizade’s vehicle as he drove home in January 2009. Officers pulled him onto the street and handcuffed him, before ‘producing’ drugs from his car. Now he is in Bailov Prison, awaiting sentencing. Salur knows he stands no chance in court: the judicial system follows orders from above, and the police routinely plant narcotics on individuals to send them down. His court date is due in four days. Three years is his expected sentence, for a crime he did not commit.
‘My son was arrested in mid-January. The police claimed it was drugs, as they often do in such cases. Even if Salur did drugs, which he doesn’t, he’s too smart to take any in his car when his father is a targeted dissident,’11 Zardusht Alizade explains to us. Two months before Salur’s arrest, Zardusht had spoken publicly to European parliamentarians in Brussels, describing how in Azerbaijan an ‘organised criminal ruling class uses oil money to assert its authority over the population’. The Azeri ambassador was present, and did not approve.
Then the BBC interviewed Zardusht on the nineteenth anniversary of the massacre of Azeri protestors by Soviet troops on 20 January 1990. He explained that, in hindsight, it had become clear that this event was less about the independence of Azerbaijan than about saving Heydar Aliyev and promoting his interests. Gorbachev had ordered Aliyev’s arrest for corruption and crimes committed while he was first secretary of the Azeri Communist Party. ‘By precipitating the disaster, Aliyev saved his skin – whereas we lost many activists, leaders and the relationship with Moscow.’
The next day, the secret police sent Zardusht a message by pulling over his son’s car. ‘He’s not even political – he paints cars. For my speaking out, he is being made to pay the price.’ Zardusht has ensured he has a good lawyer, but knows it will make no difference. ‘The MTN, the new KGB, knows that this is more effective than sending me to prison myself.’
Koba, Ummugulsum, Salur. All were imprisoned on trumped-up or unfair charges by the secret police in its various incarnations: the Tsar’s Okhrana, Stalin’s NKVD and Ilham Aliyev’s MTN. Bo
th Ummugulsum and Salur were imprisoned not because of their own actions, but in order to put pressure on their relatives, a husband and a father. For the last hundred years, this prison by the sea has helped Baku’s rulers keep a tight grip on both the residents of this city and the money from oil beneath the ground.
Leaving the front courtyard of Villa Petrolea, we take Xoşginabi Kuç and head east, searching out the building that the windows of the BP conference room overlook.
Today, Bailov Prison is surrounded by a six-metre-high wall covered in peeling yellow paint, topped with razor-wire. A chain-link fence crowned with barbed wire encircles the whole, and armed wardens patrol the roofs. Besides the guards, there is no sign of life from inside. The street is deserted, apart from two large German Shepherd dogs and a Doberman fighting over and attacking a tin can. James jumps as they run past, and is eager to move on. A lone boy scurries past, carrying bread home, head down, not giving us so much as a glance.
At the prison’s main entrance, two soldiers in fur hats are repairing an official-looking black car. Both peer under the bonnet clutching spanners while an officer revs the engine impatiently. Once the car is fixed, the white barrier across the entrance, which looks like it should be automatic, is physically swung open by hand. Salur is still sitting inside this gate, punished for his father’s bravery.
The Oil Road Page 9
