Private Empire: ExxonMobil and American Power

by Steve Coll

  ExxonMobil’s managers in Chad took justifiable pride in the $16 million in annual wages, training, education, and exposure to global norms in health and education that the corporation provided to the Chadians in its direct employ. The knock-on benefits of these improved lives would be substantial, if hardly enough to right Chad. Yet ExxonMobil considered the construction of deeper social and physical infrastructure in the country to lie outside of its responsibilities. That was why the corporation had so purposefully recruited the World Bank into the high-risk Chad oil project in the first place. When ministers in Chad’s government or local human rights activists begged ExxonMobil to build a health clinic or lay a road, the corporation typically demurred, explaining that oil production was its core competency and that it intended to follow the letter of its contract. As oil production grew and Idriss Déby did not become a better president, and Chad’s social and health indicators failed to improve significantly, ExxonMobil’s executives privately blamed the World Bank. The bank had simply not done what it promised to do when it endorsed and funded the 2000 plan to manage oil revenue for the greater good of Chadians, ExxonMobil’s managers argued. There was some truth in their complaints. ExxonMobil operated on time and under budget in a way that a sprawling, multinational bureaucracy such as the World Bank never could. The oil company’s criticism assumed, however, that the experimental governance goals embraced by all of the project partners—including ExxonMobil—had been realistic in the first place. By 2006, this no longer seemed a defensible claim.8 Irving prided itself on its realism. The most honest assessment was that the two main parties to the Chadian oil project had always been ExxonMobil and its partners and shareholders on the other side, and Déby and his kleptocratic clansmen on the other.

  In Doba, the flat market town nearest to the oil fields, a revenue-sharing scheme supported by the bank endowed the local government with tens of millions of dollars. The political chiefs did build a school, but generally favored grandiose construction projects over health and education services. They spent $4.4 million on a soccer stadium in Doba that could seat twenty thousand, notwithstanding the lack of a professional soccer league of any significance. School, road, and hospital building projects went forward more encouragingly, but when they were finished, the buildings stood empty for lack of nurses, doctors, and teachers. Local construction budgets and expenditures were grossly inflated by the skyrocketing costs of materials and the large number of skimming hands involved. Unmowed grass soon bent like wheat across the soccer stadium’s field. Young mothers in the area still died in childbirth at rates comparable with the era before oil. “It’s not easy to hide the sun with your hands; the money is there in large quantities,” remarked Boukinebe Garka, a member of a national commission meant to help supervise oil revenue. “But it is not being spent very well.”9

  As Idriss Déby’s government grew wealthier, the president also became more vulnerable to mutiny. Like his acquaintance Teodoro Obiang in Equatorial Guinea, Déby increasingly looked like a nervous dragon sitting on a pile of treasure, waiting to be assaulted by coup makers. In 2003, Déby had pushed for alterations to the constitution that would allow him to become president for life, and he succeeded in abolishing term limits by 2005, a betrayal of Chad’s shaky democratic parties that had further isolated Déby politically. He had come to power by force years earlier, backed by Sudan’s secret police, and so it did not require a paranoid imagination to think that he might only go out by a similar method.

  Sudan, to the east, was engulfed by violence in the province of Darfur, which bordered Chad. Marauding Arab militias loyal to President Omar Al-Bashir waged a scorched-earth campaign through Darfur’s villages and towns after 2003. At least 300,000 people died and about 2.5 million fled their homes. About 240,000 Sudanese civilians crossed the border into Chad and crowded into camps, where they were formally recognized by the United Nations as international refugees. At first, Déby tried to play a balancing role in the Darfur crisis, mediating between his former patron, President Bashir, and his newer patrons in Washington. By 2005, however, Déby perceived that the Darfur conflict might threaten his grip on power. Many of the non-Arab rebels battling Sudan’s government belonged to Déby’s own Zaghawa tribe. Bashir had been urging Déby to bring these rebels under control—to prove, in effect, that he was a friend of Sudan’s. Suppressing the rebels was beyond Déby’s means, but in any event, he needed the Zaghawa networks for his own security. In 2005, he aligned himself with Khalil Ibrahim, the powerful Islamist leader of a Darfur rebel faction. Once he did that, Déby made plain to Khartoum that he had changed sides, defaulting on his historical debts to President Bashir.10

  In reply, Sudan’s security services offered vengeful support to Mahamat Nouri, the head of a Chadian rebel group, the Front Uni Pour le Changement, or the “United Front for Change.” Déby picked up intelligence that a Nouri-led rebel invasion from Sudan’s territory, for the purpose of removing him from power, could come at any time.

  Déby’s defenses to the east and around the capital were weak. His Ministry of Defense paid out about 70,000 salaries, but only about 20,000 of those “soldiers” possessed uniforms and occasionally turned up at their jobs, while only about 4,000 were armed, trained, and prepared for combat. Moreover, if Déby ever ran out of the cash he required to pay his tens of thousands of ghost military salaries, he would invite mutiny—this threat was a constant drain on his cash flow. Mercenary Algerian, Ukrainian, and Mexican pilots on rotating contracts flew the ramshackle planes and helicopters in the president’s tiny air force.11 The professional French-manned garrison and air force training mission at N’djamena’s international airport offered a much more convincing defensive deployment—but only if, in the heat of a crisis, the French government decided that it was in its interest to have its soldiers shoot at Déby’s enemies, a highly uncertain prospect.

  Such was Déby’s predicament late in 2005: He feared an imminent rebel invasion aimed at overthrowing his regime, but he lacked adequate means to defend his palace. The absurdity, from his perspective, was that at the very moment this threat loomed, he was becoming richer than many of his neighboring dictators—or “authoritarian leaders,” as Washington sometimes preferred. Under the 1988 oil production contract, as world oil prices rose and ExxonMobil recouped the costs of its initial oil field investments faster than expected, the revenue flowing to Déby also soared; it now exceeded all previous projections. His government took in $300 million in 2005.12 Yet Déby could not spend his own money freely because of his good governance compact with the World Bank. He was banned from buying as many guns, desert vehicles, and attack aircraft as he felt he needed to defeat Bashir’s rebel proxies. Déby had gone along with the surrender of some of Chad’s sovereignty to the World Bank back in 2000 because it was necessary to get the country’s oil flowing. He was not going to surrender his office to a foreign invader to preserve the plausibility of some Westerner’s utopian ambition. “It was very hard to explain to Chadian opinion that we must buy weapons,” recalled Mahamat Hissène, a minister in Déby’s cabinet. “So we did not develop real power to respond to attacks coming from outside. . . . Unfortunately, in front of us, we don’t have politicians, we have technicians. The World Bank and I.M.F. sent us technicians who don’t care about the security of the country.”13

  Late in 2005, Déby at last announced that he would introduce amendments to Chadian law that would break his government’s bonds with the World Bank. By doing so he threatened to upend the nation-building compact and international financial rules that had prevailed, however raggedly, long enough to reward ExxonMobil for enduring high political risk in Chad. Just as the corporation reached breakeven and its local profits began to gush, Déby’s desperation for money and guns threatened to bring the whole project down.

  Ron Royal, an engineer with many years at the corporation, managed ExxonMobil’s country office in N’djamena. In addition to his security team, a handful of expatriate and Chadian public a
ffairs advisers—lobbyists and analysts—advised him. Royal reported in turn to the Africa division in Houston. Until the crisis that erupted that autumn, Royal’s job had been merely grinding and thankless. Idriss Déby paid little attention to the details of his country’s oil contracts or operations; one American embassy cable described him as “terribly ill-advised and grossly uninformed” about oil.14 As a result, Déby’s minions—cabinet ministers, labor union allies, governors in the south, and other assorted rent seekers—felt free to harass ExxonMobil at every turn, seeking money to skim or for other advantages. In addition to the chronic thefts from ExxonMobil facilities, Royal had to respond to wildcat strikes, court cases arising from labor disputes, public protests, complaints by environmentalists, delays and threatened fees imposed by immigration officials who issued visas, customs delays, and other challenges. Chad’s politicians and labor leaders might be poor and some of them might be unsophisticated, but they had been schooled in obduracy and provocation by French colonialists, which made them formidable. A typical matter in Ron Royal’s in-box was the announcement, during 2005, by the Chadian civil aviation authorities that because ExxonMobil had overlooked a certain legal provision, the corporation would have to immediately start paying the country’s struggling state-owned airline $150,000 a month in royalties for the right to avoid having ExxonMobil workers fly on the Chadian airline’s planes. Chadian officials also were deeply suspicious about the relatively low prices the country’s sour, heavy oil attracted on world markets. Some of their worries seemed irrational—it was as much in ExxonMobil’s interest as in Chad’s to receive the highest possible per-barrel price. Yet the wide gap—more than $20 per barrel—between the price of Chad’s oil and the prices for more attractive, benchmark blends of oil that were published in world newspapers raised suspicions with Déby and his aides. ExxonMobil flew some of Déby’s oil advisers to Fairfax, Virginia, and London to show them how ExxonMobil bought and sold oil on the world market, and how it negotiated to win the best possible prices for Chadian barrels from shipment to shipment. Even this show-and-tell had limited impact: Afterward, one of the Chadian delegates, Abdelkarim Abakar, remarked to an American diplomat that the “visit solidified the question of why Doba crude was priced so low when the price of oil in the international markets was priced at such a high level,” and he argued that if ExxonMobil “was truly willing to communicate openly” about the issue, “it would have organized this visit a long time ago.”

  Ron Royal and his team met regularly with American diplomats in N’djamena, including Marc Wall, the ambassador, who had succeeded the part-time novelist Chris Goldthwait. Wall was a career diplomat, a thin, professional, silver-haired man with extensive experience in troubled countries. Normally, Royal did not ask the embassy to lobby on ExxonMobil’s behalf with Déby or his aides; ExxonMobil took care of its labor, security, and government lobbying hassles on its own. That changed during the first weeks of 2006. The crisis Ron Royal and ExxonMobil faced that winter was instigated from Washington. Its principal architect was the World Bank’s new leader: Paul Wolfowitz.

  In his previous position as deputy secretary of defense, Wolfowitz had been an intellectual leader and a passionate defender of the Bush administration’s decision to invade Iraq and overthrow Saddam Hussein. In 2005, as the war descended into chaos, and as its costs in blood and treasure to the United States rose precipitously, Wolfowitz left the Pentagon. He arrived at the World Bank in a complex political and psychological position: He was deeply unpopular in many parts of the world, unrepentant about Iraq, and yet he seemed eager to demonstrate his commitment to poverty alleviation and liberal development goals. Presented in his first months on the job with the conundrum of Idriss Déby’s defiance of World Bank principles of good governance, Paul Wolfowitz decided to make an example of him.

  When he reflected publicly on Africa, Wolfowitz grouped its countries into three broad categories: About a third of the continent’s nation-states seemed to be hopeless basket cases, including Sudan, Somalia, and Zimbabwe. About another third, endowed with oil and other natural resources, were doing better, but were struggling with the resource curse—Angola, Equatorial Guinea, and Chad were examples. Another third were becoming successful, registering positive economic growth rates for ten years or more—Botswana, for example, and also previously failed states such as Mozambique and Rwanda. Wolfowitz felt the World Bank had an opportunity to promote a more nuanced picture of Africa’s economy. The continent’s negative image “wasn’t helped by large rock concerts that talk about what a miserable, failing place it is,” he remarked. He did not blame Bono or U2 for this image problem; he blamed dictators like Zimbabwe’s Robert Mugabe. Chad’s ruler was nowhere near as bad as Zimbabwe’s, but no good would come from appeasing Déby on the matter of his arms purchases, Wolfowitz concluded.

  Chad has a sovereign right to decide how to spend its oil money, Déby argued to Wolfowitz over the telephone on the night of January 5, 2006.15

  Their conflict had reached a climax. Wolfowitz was threatening to freeze the money ExxonMobil and its partners deposited in Chad’s Citigroup accounts in London—an action he could take by invoking the bank’s rights under its pipeline lending agreements. Even though the amount the bank had lent to Chad was relatively small—less than the annual oil revenue Déby now received—under the loan terms, the bank could seize Déby’s oil funds.

  Wolfowitz told Déby that he accepted that Chad was sovereign. However, Chad’s sovereign government had entered into certain contractual commitments with the World Bank to spend oil revenue on the health, education, and welfare of Chad’s people. It was in the interests of Chad’s sovereign government, Wolfowitz argued, to show the world that it was an honorable party to the agreements it had made.

  They talked through French translators that night for two hours. Neither of them budged. The next day, Wolfowitz announced that the World Bank would withhold new loans to Chad; a freeze on its bank account would follow if Déby still refused to compromise.

  Wolfowitz tipped Déby into a rage. His aides told Ron Royal at ExxonMobil that if Exxon went along with the World Bank any longer, Chad might order the corporation to shut down all oil production.

  Royal met with Ambassador Wall at the U.S. embassy. Closure of Chad’s fields “would be catastrophic,” he said, and would likely set off a chain of loan defaults. ExxonMobil wanted a cooling-off period and had asked the World Bank for time to negotiate a compromise, but the bank had responded with a letter to Irving, declining ExxonMobil’s request.

  Royal revealed to Wall for the first time that ExxonMobil was on the verge of profitability in Chad, and that, therefore, the corporation “was now in an income tax-paying position.” Given rising world oil prices, ExxonMobil and its partners might soon hand over to Déby’s regime between $80 million and $200 million in initial tax payments—enough, perhaps, for Chad to pay off the World Bank altogether and extricate itself from its commitments to social investments.16

  Royal met with Déby and warned him that “dismantling oil operations and forcing the World Bank to leave” would “jeopardize the reputation of the country and the possibility of foreign investment.” He also told Déby for the first time that Chad would soon receive a tax windfall—if the president allowed ExxonMobil to keep pumping oil. Déby was surprised—he asked for specifics, but remained noncommittal about any compromise. Royal contacted Wall again and told him that he feared a “melt-down” and a final collapse of the entire Chadian oil project—six years and several billion dollars of investment, so far.17 Royal proposed various plans by which ExxonMobil might win support from the Bush administration to defy Wolfowitz’s hard line. Under Royal’s plans, ExxonMobil would pay Déby royalties while international talks proceeded. The oil company would put some of this cash directly into Chad’s treasury, defying and undermining Wolfowitz’s freeze.

  Ambassador Wall took up the case. He met with Déby and found the Chadian president “taken aback” by Wolfowitz
’s “decisive actions.” Wall perceived that the United States had many interests in Chad besides the World Bank’s development goals: the economic benefits and jobs associated with oil production, counterterrorism, the care of refugees from Darfur, and the need for Chad’s cooperation in bringing the Darfur conflict to an end. The ambassador tried to promote the idea that it would be in the interest of both Déby and the World Bank to reach a settlement.18

  By now ExxonMobil had made its own choice clear: It was more interested in the survival of Chad’s oil production than it was in the World Bank’s experiment in nation building. If Déby found a way to pay back his bank loans, and also stuck to the letter of his oil production contract, ExxonMobil would stay with him, according to State Department cables and ExxonMobil managers involved. The corporation wanted to keep its options open: “Esso is seeking to stress its neutral position vis à vis the dispute between the [World Bank] and the [government of Chad], as it is not a signatory to the agreement,” Wall reported to Washington. ExxonMobil described its general approach to troubled African countries where it produced oil by emphasizing that the corporation was merely “a guest . . . and as a guest we’ve got to show respect. . . . It’s not up to us to go into a sovereign country and tell them how they ought to be governing their people.” That was an Orwellian defense in this case, because the Chad oil project had been made possible for ExxonMobil in the first place precisely because the corporation had supported the World Bank’s plan to control the uses of Chad’s oil funds. Yet by declining to sign the final bank agreement, ExxonMobil had positioned itself so that it was no longer accountable—as the bank’s deal with Déby fell apart, the corporation stood aside. If anything, the corporation was subtly encouraging Déby to defy Wolfowitz. “We like the format we had,” Andre Madec, an ExxonMobil global community relations executive said. But he refused to criticize Déby for his decision to balk.19