Book: Private Empire: ExxonMobil and American Power

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“How High Can We Fly?”


On Wednesday evening, November 14, 2001, Vladimir Putin and his wife joined George W. Bush; the president’s wife, Laura; and about two dozen friends and cabinet officials for dinner at Bush’s ranch in Crawford, Texas. The guests wore jeans and boots; the menu included southern fried catfish. Putin stood to deliver a toast. Referring to his host, he said that the United States “was fortunate at this critical time in its history to have a man of such character at its helm.” Bush returned the compliments. In June, when he had met Putin for the first time, in Slovenia, Bush said that he had “looked the man in the eye” and had discerned “a sense of his soul.” Bush had been mocked for this claim, but in Crawford he again mentioned his respect for Putin’s soul, and he told the Russian president that he sought to “transform the relationship between our two countries.”

After a dessert of pecan pie and ice cream, members of the group drifted outside to warm themselves around a fire pit. Putin sought out Don Evans, the president’s close friend, who had served as the chairman of Bush’s 2000 presidential campaign and was now his secretary of commerce. Evans had run an oil and gas company prior to joining the Bush administration. He told Putin that he appreciated the toast he had delivered about his friend the president. Putin raised the subject of oil and gas production. Evans figured that the Russian president, a former K.G.B. career officer, had probably read an intelligence file describing Evans’s background. He welcomed the conversation, nonetheless; the new Commerce secretary was drawn to the prospect of a renewed energy partnership between Moscow and Washington. He and Putin talked about the possibilities.

“How has America accomplished so much in only two hundred years?” Putin asked him at one point.

Evans spoke about American freedoms, economic competition, innovation, and the rule of law. “People in America are good people,” he said. “They wake up every morning trying to do the right thing. I don’t care what kind of system you have, if the people aren’t good, decent people, it won’t work.” But even moral citizens need a system of law and governance so that they will be treated fairly and, eventually, perhaps find financial reward, Evans continued. Putin had the opportunity to build such a system for Russia, as a legacy of his leadership, Evans and Bush believed. The United States could help by delivering technology, capital, and experience of the rule of law in international business.

In the oil industry, in particular, Russian requirements and American capabilities overlapped. Oil and gas production made up a large share of the Russian economy, so free-market reforms in the oil sector might provide a transformational catalyst for the entire country. Russia possessed at least 60 billion barrels of proved oil reserves, according to Oil & Gas Journal, and 1,680 trillion cubic feet of natural gas reserves, a quarter of the world’s total and more than any other nation. For American oil companies, ownership of even a modest percentage of that bounty could be transformational.

The fireside chat between Putin and Evans that night marked the start of an oil romance between the Russian and American governments, one that would soon draw in Lee Raymond and ExxonMobil. From the beginning it was an engagement marked by exceptional optimism on the American side, shadowed by a long history of mistrust rooted in the cold war—“old think,” as Bush’s ambassador to Russia, Alexander “Sandy” Vershbow, put it in a cable to Washington. The hypothesis Evans and others in the Bush administration pursued after the Crawford dinner was that a strategic campaign to deepen commercial ties between oil companies in the United States and Russia might transform Russia’s internal politics, remake U.S.-Russian relations, and even alter the global geopolitics of oil. President George H. W. Bush had seen oil-for-friendship as a critical element of his campaign to build a partnership with Mikhail Gorbachev as the Soviet Union cracked up; Bush persuaded Gorbachev to endorse Chevron’s pioneering, lucrative entrance into the Tengiz oil project in the then Soviet Republic of Kazakhstan. George W. Bush intended something similar with Putin, whose intentions as a political leader and as a sponsor of market-led modernization were at best enigmatic.

Bush did not see Russia only through the prism of oil, but he did regard energy policy as critical to his ambitions for his relationship with Putin. Bush’s national security advisers, led by Condoleezza Rice, an academic specialist on Russia, and her deputy, Stephen Hadley, sought to construct a more cooperative relationship with Moscow, one that might coax Putin’s government toward an embrace of democratic capitalism and diplomatic normalcy within Europe. They knew there inevitably would be tensions and disagreements that would drag them back toward rivalry. To prevent or at least limit that recurrence of old think, Bush and his advisers concluded that they needed to find three or four shared projects that would invest Putin and the Kremlin in a broad, pragmatic, ongoing pattern of U.S.-Russian cooperation. Space programs, and particularly the management of the International Space Station, offered one such pathway. Counterterrorism and preventing nuclear proliferation after the September 11 attacks also appeared to be promising. But the project with the greatest potential—the one that might literally invest the United States in Russia’s success, and vice versa—involved Russia’s oil and gas production. “I think all of us at the senior level thought this was a real moment to seize, from the president to Don Evans at Commerce to me to the vice president as well,” recalled Spencer Abraham, then Bush’s Energy secretary.

Russia not only held the world’s second-largest combined oil and gas reserves, after Saudi Arabia, it was rising again as an oil producer and exporter. The political chaos and economic freefall that followed the collapse of the Soviet Union had caused Russia’s oil production to fall from a high of more than 10 million barrels per day to about 6 million in 1996, about half of which was exported. As Putin took office on the last day of 1999, the industry had started to recover. Domestic consumption remained steady at about 3 million barrels per day, while exports were rising toward 7 million barrels per day and headed higher year by year. Most of the exports went to Europe, particularly to major economies such as Germany and the Netherlands. Yet Russian oil companies required new investment to reach their full production potential.

The question was whether the Bush administration’s push for a strategic oil partnership with Moscow after the Crawford dinner was at all realistic. Energy policy specialists in the Clinton administration hadn’t thought so; they had been working on the same issues of energy cooperation with Russia throughout the late 1990s and had concluded, as a former White House official put it, that “there was no discernible forward progress” toward free-market reform in the Russian oil sector under Putin, and “the pendulum was swinging markedly” against Western oil corporations that sought to own Russian reserves. If anything, from 1998 onward, there had been a “very, very clear trend in Russian policymaking toward the U.S. . . . of growing suspicion.” The prize was so alluring that all of the major Western oil corporations persisted in Moscow, nonetheless. For all of Russia’s traps—unpredictable politics, Mafia-like cliques in business and government who used murder and vendettas as negotiating tactics, prosecutors and judges subservient to shadowy powers, and a general absence of the rule of law—there was no other country on Earth with so much oil that offered even the pretense of a capitalist-friendly opening. The numbers—the challenge of annual reserve replacement, the scale of Russia’s holdings—argued for risk taking.

“How high can we fly?” Ambassador Vershbow, a career foreign service officer who had long studied Russia, asked in a cable to Washington a few months after the Crawford dinner. Very high, he wrote. In developing a new strategic oil supply partnership in Moscow, the United States “will need to be sensitive to the reaction of other energy-producing states, both in the region (i.e., the Caspian) and outside it (notably Saudi Arabia).” Nonetheless, there was potential to change global economics and politics. Strategic energy cooperation between Washington and Moscow, he wrote, “is a deal. . . . Russia improves along market lines and continues to divorce politics from commerce, and we help it get what it wants—markets, investment, and stature. But the deal can be broader. If successfully developed, it can serve as a paradigm as well as a driver for cooperation and market-driven behavior in a variety of sectors, a trend that will only help Russia integrate into the world economy.”

The United States owned no oil companies, however. To forge the deal Vershbow had in mind, the Bush administration would need to encourage America’s largest private oil firms, particularly ExxonMobil and Chevron, to cooperate.

Like a section of the American public, some in Putin’s cabinet seemed to believe that the Bush White House made all the decisions for America’s largest multinational oil companies, or vice versa. Putin himself seemed to understand how the American system worked, but some of his advisers projected what they knew about the Russian government’s influence over its own oil and gas companies onto Washington, assuming it was the same there. German Gref, the Russian minister of economics, with whom Don Evans worked closely, would occasionally make points during their energy talks suggesting that he thought that Evans or Bush had heavy influence at ExxonMobil.

“Exxon writes their own checks and they are accountable to their shareholders—they’re not accountable to me,” Evans told Gref. “I don’t write their checks for them.”

Evans tried to explain that no matter what sort of agreement Washington and Moscow might forge about energy policy, no American oil company was likely to risk large amounts of investment capital if it feared that Russia’s political and tax environment was unreliable. Evans quoted an aphorism often repeated by Bush’s Treasury secretary, Paul O’Neill: “Capital is a coward, and capital is not going to go any place that is unfriendly.” His argument was undermined by the fact that all of the major oil companies—ExxonMobil, Chevron, Shell, BP, Total, and Statoil—had already risked capital in Russia, even though its political economy was dangerous and highly unsettled. But it was Evans’s job to make the case for Russian legal, tax, and policy reforms. On specific transactions, he encouraged the Russian government to deal directly with the American corporations, particularly ExxonMobil and Chevron, and he always spoke highly of Lee Raymond.

ExxonMobil ran an office in Moscow, headed by a former Australian diplomat, Glenn Waller. Rosemarie Forsythe, the former Clinton administration National Security Council analyst, also advised Raymond during ExxonMobil’s talks in Russia after 2001. The corporation, as ever, believed it was better off handling things in Moscow on its own. “Exxon operates independently,” recalled Leonard Coburn, who worked at the Department of Energy on the Bush administration’s Russian oil initiative. “They think they can do better than the [U.S.] government and often they do.” Occasionally, Lee Raymond might turn to Vice President Cheney or another very senior official to give the Russians “a good kick in the pants,” as Coburn put it, about a specific tax or policy stalemate in Moscow. Otherwise, the corporation negotiated in private.

ExxonMobil owned one significant oil interest in Russia at the time the Bush administration made its push to deepen cooperation. In the chaotic last months of the Soviet Union, investment bankers retained by elements of the dying regime presided over by Mikhail Gorbachev shopped around all sorts of natural resource deals; Lee Raymond had authorized bids on an exotic project in Russia’s far eastern territory, near Sakhalin Island, just above Japan. The project dated to the 1970s, when Japanese corporations had lent money to the Soviet Union in exchange for exploration rights. But the deal went nowhere until the Soviet Union began to crack up and finally split apart. In the early 1990s, Raymond had called an old hand named Terry Koonce, who was running Exxon’s oil operations in Calgary, Canada, and asked him to go to Moscow to “start to open the way in Russia.”

“Man, I thought you sent me to Siberia when I went to Calgary,” Koonce said.

“No, I was just getting you warm.”

It was not until 1996 that ExxonMobil closed on terms for what became known as the Sakhalin-1 project. It was an undertaking that would test the corporation’s engineering prowess like no other. Hurricane winds swept the Sakhalin region each autumn, and ice packs up to six feet thick built up during the winter. After the spring, melting ice floes threatened to knock down any offshore oil rig in their way. Exxon decided on a plan to drill a seven-mile horizontal well from mainland Russia underneath the ocean waters. It was the only well of its kind in the world. Sakhalin-1 suggested some of the appeal of Western oil technology and engineering skill to Russia. But to make the deal on terms acceptable to Exxon, Russia’s government had had to set aside its nationalism and share oil ownership.

The Sakhalin-1 deal had been made at the nadir of the Boris Yeltsin era. Post-Communist enthusiasm about democracy and private enterprise had yielded to disillusionment and backlash as bankers and other new Russian oligarchs seized control of former Soviet state property in corrupt transactions. During this period ExxonMobil was one of three Western oil corporations to enter into production-sharing agreements, or P.S.A.s—contracts that allowed for direct oil ownership by the foreign firms and also sought to segregate arbitration rights in the deal from the morass of Russian law.

Rex Tillerson had followed Koonce as the lead ExxonMobil executive on Russia. He managed the Russia account from a base in Texas, flying over as necessary. Tillerson formed a friendship with the Sakhalin governor and decided to rope in a state-owned Russian oil firm as a project partner, so that ExxonMobil and the Russian government would be “on the same side of the table,” as Tillerson put it later, if disputes over the project arose. ExxonMobil had connections at Rosneft, one of the smaller state-owned oil and gas companies, with about 10 percent of the country’s reserves, a company widely regarded as a bureaucratic mess even by Russia’s standards. Around 1995, Lee Raymond had met with Rosneft executives to talk about a possible acquisition of the firm. The Russian company’s leaders had said they were willing to merge into Exxon, and “begged and pleaded” to be acquired, as an executive involved recalled it, but Raymond declined because even Rosneft’s leaders seemed unsure about what their company legally owned. Rosneft’s participation in the Sakhalin project provided some protection, and the legal and arbitration protections in the P.S.A. helped too, but the deal remained politically vulnerable in Moscow. Delays, arguments, and disputes over environmental issues, pipeline routes, and other subjects stalked Sakhalin-1 from its inception.

Under pressure, Tillerson applied the Exxon formula: no surrender. “We jacked this all the way to the top,” recalled one of his colleagues. “We brought the issue up with the president [Putin] and we said, ‘Look, we have got the contract signed, we are doing everything we are supposed to do—here are the rules. And these guys don’t want to follow the rules. What are you going to do about it?’”

Putin offered to write out an executive order saying that Sakhalin-1 could proceed, but Tillerson refused. Putin did not have enough legal authority to satisfy ExxonMobil; Tillerson said he did not want to operate by decree, but by durable laws. Tillerson wanted to have “all the t’s crossed and i’s dotted exactly according to Russian law and regulation, and if we couldn’t get it done, then we were not going to do it,” the former executive remembered. Ultimately, after Putin “blew his stack” at ExxonMobil’s affront, the Russian president agreed.

In 2001, India’s largest state-owned oil company bought into the Sakhalin deal in a transaction approved by Putin but which required ExxonMobil’s acquiescence. ExxonMobil took its time reviewing the issue. At a White House meeting with President Bush, India’s prime minister, Manmohan Singh, asked Bush to intervene. “Why don’t you just tell them what to do?” Singh asked.

“Nobody tells those guys what to do,” Bush answered.

This was the state of ExxonMobil’s relations with Putin’s regime when the Bush administration launched its ambitious energy diplomacy: Sakhalin had been successfully launched, but there had been a tough struggle over terms. Russia’s negotiating culture of bluff and coercion seemed to suit ExxonMobil. The corporation and the country where it sought to deepen its investments had similar personality traits. ExxonMobil’s executives convinced themselves that their earlier firmness had brought Putin around on Sakhalin. This self-affirming perception would shape Lee Raymond’s attitude in the next round of negotiations, after 2001, when the stakes would be higher.

In early April 2002, Rex Tillerson arrived at the ExxonMobil terminal at Love Field in Dallas to board a jet to Moscow. Tillerson had turned fifty less than three weeks before. He had risen to the cusp of the top job at ExxonMobil partly on the strength of his work in Russia. The Bush administration’s oil initiative placed ExxonMobil’s business dealings in Russia in a new light. There was now the potential, if all went well, for ExxonMobil to acquire substantial equity oil in Russian fields, enough to make a major contribution to the corporation’s reserve replacement requirements. There was no other place on Earth where the corporation enjoyed such full and explicit partnership with the White House in the pursuit of such large oil holdings—the sort of partnership that ExxonMobil executives often claimed they neither wanted nor needed.

President Bush had scheduled a visit to Moscow for May 2002 to meet with Putin and follow up on energy diplomacy, among other subjects. The administration hoped at this Moscow summit to announce new agreements between ExxonMobil and Russian oil companies, as well as between Chevron and Russian firms. They would not be large deals, but the announcements would display momentum. Tillerson rehearsed for negotiations with Putin, role-playing with a colleague.

On the eve of Bush’s arrival in Moscow, Tillerson announced a $140 million contract with a Russian shipyard to upgrade one of ExxonMobil’s Sakhalin production platforms. Don Evans attended the contract-signing ceremony in May and declared that direct U.S. investment in the Russian oil industry would soon be increasing. A joint statement issued by Putin and Bush called out the “successful advancement of the Sakhalin-1 project” and drew similar attention to a Chevron pipeline agreement. Putin and Bush welcomed the “implementation of more projects in the fuel and energy sector . . . on the basis of Production Sharing Agreements and other frameworks.” It was unusual for an American president to put his name behind a particular contract genre, but unlike in Iraq, the Bush administration had decided that American foreign policy would embrace and promote the direct ownership of Russian oil by U.S. corporations.

Ambassador Vershbow cabled to Washington that the ExxonMobil signing ceremony had highlighted “the importance and sanctity” of ExxonMobil’s investments in Russia, as well as the “tangible benefits for the Russian economy of cooperation in energy. U.S. and Russian companies are negotiating a slew of new potential projects that could add more meat to the bones of this framework.”

How, realistically, could ExxonMobil acquire direct ownership of Russia’s oil and gas reserves? The sell-off of Soviet assets during the 1990s had given birth to a new generation of private sector Russian businessmen—entrepreneurs, bankers, former security and intelligence officers, former apparatchiks, and opportunists of all stripes. Oil and gas plays were big draws: The dollars involved were enormous, and just a 1 percent “point” as a commission on a deal or as a discount on a contract to sell oil abroad could make a man wealthy very fast. These Russian oilmen were not generally ideologues who shared George W. Bush’s vision of a new order in global oil, in which Russia would participate on free-market contract terms of the sort promoted by the International Monetary Fund. But they did see opportunity in the eagerness of Lee Raymond and his counterpart at BP, John Browne, to own a piece of Russian reserves. By 2002, one of these tycoons, Mikhail Khodorkovsky, was in a mood to deal.

Khodorkovsky was just thirty-nine years old when he opened discussions with ExxonMobil in 2002. The fortune he controlled was estimated to be about $8 billion. In the fashion of the day, he kept his short hair combed forward in a style suggestive of ancient Rome. He was a handsome man with brown eyes and youthful energy. It required boldness to seize and build a great fortune from the ruins of the Soviet economy; in that respect, Khodorkovsky was like a dozen other Russian billionaires who had emerged from the 1990s. He was more politically ambitious than some of his peers, and as ruthless in business as any of them, but more recently, he had begun to profess a newfound appreciation for shareholder rights and even international market ideals.

He had grown up in Moscow, served as a Communist youth leader, and had graduated from a technical institute in the mid-1980s, just as Mikhail Gorbachev consolidated power and introduced reforms. He and his college friends worked with computers, symbols of modernization, and they joined one of the experimental cooperatives permitted under Gorbachev’s new economic policy. When Gorbachev allowed private banking for the first time, in 1987, Khodorkovsky and his partners—then in their midtwenties—formed a bank called Menatep. They accumulated rubles as communism collapsed. Radical reformers around Boris Yeltsin issued 150 million vouchers with which Russians could supposedly buy shares in former Soviet assets. Many people dumped the vouchers; Menatep bought them up. By 1995, Yeltsin’s administration was running out of money, in part because bankers like Khodorkovsky were not paying their taxes. Menatep helped to mastermind a “loans for shares” scheme with Yeltsin. In exchange for keeping the Russian government solvent and assuring Yeltsin’s reelection, Khodorkovsky and his partners paid rock-bottom prices for state oil and gas properties. They spent about $300 million for a recently assembled energy corporation called Yukos, whose underlying oil and gas reserves were worth about $5 billion. Khodorkovsky was not only opportunistic, he was ruthless; a few years later, during the Russian currency and banking crisis of 1998, he shifted assets around to protect his fortune, while leaving depositors and investors, including some of the world’s most respected investment banks, with large losses.

As Russia’s economy recovered in 1999, Khodorkovsky adopted a new strategy. All of the billionaires who had made their fortunes as he had claimed legitimacy, but they remained vulnerable politically, in part because many Russians justifiably believed they had stolen their wealth. Vladimir Putin spoke about advancing free-market reforms and fashioning a deeper democracy as he assumed the presidency in late 1999, and he accommodated the business oligarchs, as they were known, in exchange for their agreement to keep out of politics. Yet Putin also represented a reviving elite of former K.G.B. officers, military officers, and Soviet-era bureaucrats who might seek to challenge the private sector billionaires for power and the control of state wealth.

According to Vladimir Milov, who was deputy energy minister early in Putin’s administration, Khodorkovsky’s conflicts with Putin dated to the 1990s’ wild scrambles for state assets. “By the time Putin became president, the relations between his group . . . and the Menatep group really had been tense.” They had struggled over oil privatization deals during the 1990s and had evolved into rival camps influenced by former K.G.B. officers maneuvering for profits and power: “Yukos was the company which was, I believe, the most infiltrated by former K.G.B. officers out of all Russian business structures,” Milov said. That was a difficult matter to quantify, but from the time Putin became president, his own group of former security men “saw an absolutely real challenge from Menatep” rivals.

Khodorkovsky sought to protect himself after 1999 in part by transforming Yukos from an opaque amalgamation of dubiously acquired property into a transparent multinational corporation that adhered to international accounting standards. His full motivations and intentions were difficult to discern: He was a man in a hurry with a record of questionable business dealings; he seemed ambitious politically; and he increasingly flew to London and Washington and Paris, where he delivered speeches, built networks, and maneuvered for gain. He now positioned himself as the leading practitioner of “normalized” democratic capitalism in Russia. He moved to develop two highly ambitious projects simultaneously: a merger between Yukos and Sibneft, another post-Soviet oil giant, which would create one of Russia’s largest oil companies, and a sale of part of Yukos to a Western oil corporation. That would diversify Khodorkovsky’s political risk by aligning Yukos with the interests of America or Britain or France, depending on whether it was ExxonMobil or BP or Total that invested in Yukos. “He probably rushed too early for this,” recalled Milov. “I think he also realized, because of his personal conflict with Putin, he was maybe running short of time.” A deal involving a Western buyer would also allow Khodorkovsky and his founding Menatep partners to take cash out of the business and legitimately move it abroad.

Khodorkovsky needed American and European specialists to help him with this corporate metamorphosis, to spruce up Yukos’s books so that someone like Lee Raymond could audit them and not walk away shaking his head, as he had earlier done over Rosneft. Khodorkovsky recruited experienced executives from the major U.S.- and European-headquartered oil and oil service companies to fashion this financial makeover. He also transformed Yukos technically and operationally by recruiting engineers to raise production and profitability at the company’s major oil fields. From Schlumberger, he hired Michel Soublin, a Frenchman, as an interim chief financial officer. He recruited Joe Mach, also from Schlumberger, to oversee oil production. Mach brought in Stephen Chesebro, who had been chief executive of Tenneco Energy, a U.S.-based, $4 billion company. When it came time to recruit a permanent C.F.O. Chesebro telephoned an old colleague, Bruce Misamore, then forty-nine, who had spent his career as a senior financial executive in the American oil business, including seventeen years at Marathon Oil.

“Look,” Chesebro told Misamore, “I just got a call from a buddy of mine who is working for a large Russian oil company. They’re looking for an American C.F.O. My wife told me not to call you, but I just thought, ‘Is this something that you might be interested in?’”

Misamore had semiretired; he was financially secure and comfortable, busy with his family, but he was relatively young. He decided to look into Yukos; it sounded like an adventure.

Misamore knew enough about Russia to know that you didn’t want to get yourself in the wrong situation there, lest you end up raked by automatic weapons fire one morning. He read in depth about an earlier dispute that had taken place between Mikhail Khodorkovsky and the American investor Kenneth Dart. From his initial research, he could tell that Khodorkovsky was “somebody who had the bad boy image for a while.” But he could detect as well that the young Russian was sincere about transforming Yukos into a normal corporation, with proper audits, governance structure, and accounting. Khodorkovsky had already hired a former auditor from BP and he had retained the accounting firm PricewaterhouseCoopers to implement generally accepted accounting principles. He had also retained the consulting firm McKinsey & Company and, with its advice, had “totally revamped the structure of the organization,” Misamore recalled. Khodorkovsky had also recruited international directors to his board and had a goal to win a listing for Yukos on an international stock exchange. Misamore decided to take a chance; he accepted the position of chief financial officer of Yukos and moved to Moscow in 2001.

Every Monday afternoon Misamore met with Khodorkovsky in the Russian’s office in the old Soviet-era Menatep bank building on Ulansky Pereulok, fronting Moscow’s Garden Ring. Khodorkovsky usually wore jeans, a turtleneck, and a sport coat. Misamore came to regard the young billionaire as a visionary and a natural leader. He lacked some management skills, perhaps, but he possessed a powerful intuition about Russia’s present and future, Misamore believed.

In late 2001, just as the Bush-Putin energy negotiations were launched, Khodorkovsky told Misamore that he wanted to explore the sale of some of his and his partners’ shares in Yukos—up to 25 percent—to a foreign oil company. Given the immense amount of oil reserves controlled by Yukos, this would be a great prize in equity oil holdings for whatever corporation bought in. For Yukos, it would diversify ownership and provide opportunities to explore and develop oil reserves outside Russia.

Misamore was enthusiastic. “One of the reasons I came here, Mikhail, was because I wanted to have a big impact on the future of Russia, through the example of Yukos,” he told Khodorkovsky. “This guy Putin—all the reforms, and his support for reforms—everything seems to be going very well.”

“Be very careful,” Khodorkovsky had replied, as Misamore recalled it. “What is going on behind the scenes—and nobody can see it—is that Putin is stacking the Kremlin with former K.G.B.-ers and former Russian military types. This is very, very dangerous because Putin is basically consolidating his power through these groups of ultraconservative Russians. Once he gets that power established in the Kremlin, it is going to be worse.” That was why they had to move diligently; Khodorkovsky believed they could succeed in selling a piece of Yukos, but they would have to watch the Kremlin carefully. Although he did not discuss it at length with Misamore at their weekly meetings, Khodorkovsky seemed to have his own strategy to counter Putin: He was spending money to build ties to members of Russia’s parliament, the Duma, to create a political bulwark. Khodorkovsky never explained his strategy fully, and perhaps he was too opportunistic and improvisational to have a careful one, but it appeared that he envisioned two prongs of activity to outflank Putin’s cabal: a deal with a Western oil corporation to infuse Yukos with cash and political links abroad, and a network of allies in Russian politics.

On an afternoon in early 2002, several large black armored cars pulled up outside John Browne’s home in Cambridge, England, and “numerous burly bodyguards” emerged, as Browne recalled it, to scan the horizon. When the bodyguards were satisfied, Mikhail Khodorkovsky stepped out. He went inside to join Browne over lunch. Khodorkovsky struck the BP chairman at first as being an unassuming man, but as he spoke about Yukos and its place in Russian politics, Browne grew nervous.

Khodorkovsky said he was prepared to sell a quarter of his company, plus one share, a percentage that conferred certain rights to the buyer under Russian law. Browne said he did not feel that was enough of a stake in Yukos to justify an investment. “You can have twenty-five percent, no more, and no control,” Khodorkovsky answered, as Browne recalled it. “If you come along with me, you will be taken care of.”

Khodorkovsky went on to talk about “getting people elected to the Duma, about how he could make sure oil companies did not pay much tax, and about how he had many influential people under his control,” as Browne put it later. The BP chairman felt that Khodorkovsky “seemed too powerful” and that there was “something untoward about his approach.” After the Cambridge lunch, Browne broke off negotiations. Browne’s account, written later, smacked of some of the benefits of hindsight. But it was true that he now turned away from Yukos as a target for BP’s deeper push into Russian oil. When Browne eventually found another partner in Moscow, it would have consequences for Khodorkovsky and Lee Raymond, just as his fist-mover merger with Amoco had pushed Exxon and Mobil together a few years before.

Bruce Misamore served with Rex Tillerson of ExxonMobil on the U.S.-Russia Business Council’s board of directors and respected him; Tillerson, in turn, had gotten to know Khodorkovsky. It was obvious that ExxonMobil had become a leading partner in the Bush administration’s Russia oil initiative, which might bring the Kremlin to support a sale of Yukos shares.

Misamore was aware, however, of the rumors about Khodorkovsky’s political ambitions in Russia and of his rivalry with Putin—that he might even be planning to challenge Putin or his successor for the Russian presidency. It would be difficult to negotiate with ExxonMobil if Khodorkovsky intended to move openly into political competition with Putin.

One Monday afternoon, Misamore asked his boss about that possibility. He thought Khodorkovsky would be a great president of Russia, he said, but what would it mean for Yukos?

Khodorkovsky said he could never run for president, for two reasons. He was perceived as an oligarch who had stolen his fortune, and while that was not true or fair, he continued, it was a perception so widely distributed within Russia that it was not realistic to think that he or any 1990s-era billionaire could be popularly elected. Second, Khodorkovsky said, one of his parents was Jewish. “There is no way with one Jewish parent I could ever get elected president.” Still, he said, “I am going to be very politically active. I have to be. This is my country.” He sounded noble, but his ambition was clearly dangerous, since challenging Putin politically did not look like an easy matter, and it clearly violated the gentlemen’s agreement that generally prevailed between the Kremlin and the oligarchs.

Khodorkovsky backed the Open Russia Foundation with Yukos funds to support civic and philanthropic projects; less publicly, he continued to contribute to the coffers of individual members of the Duma. Soon Khodorkovsky’s lobbyists were seen working the floor of the Duma, relaying instructions to their allies at voting time.

His audacity extended to Washington. Khodorkovsky donated $1 million to the Library of Congress in 2002. Separately, he worked Republican circles and won an invitation to table one at the National Prayer Breakfast, which President Bush attended. As in Russia, he advertised himself to the Bush administration as a transformational figure. He traveled to Washington with a PowerPoint lecture outlining how Yukos could improve America’s security as an oil importer.

His presentation was entitled “Russia, the Persian Gulf, and World Oil Supply.” Its thrust was that private oil companies in Russia, led by Yukos, could build a new network of pipelines to export more Russian oil to the United States and China, reducing dependency on unstable oil exporters in the Middle East. One of the slides forecasted that Russian exports of crude oil could more than double to 6 million barrels per day by 2010, out of total production of more than 9 million barrels per day. (The forecast proved to be accurate.)

Khodorkovsky believed that Russia should build new export systems. Lukoil and other privatized Russian companies had already drawn up plans for a new pipeline that would run north to the Russian port of Murmansk, just to the east of northern Finland, on the Barents Sea. Murmansk was free of ice year-round, and while the seas in the region could turn rough, they were navigable by the largest oil tankers.

From Murmansk, “oil can be transported from Russia to the U.S. by a shorter route than the one used for transporting crude from the Middle East,” one of Khodorkovsky’s slides declared. Russia could eventually supply 10 percent or more of American oil imports and serve Europe reliably, too. “The geopolitical imperative for today is to diversify energy sources and concentrate on the most reliable ones,” the presentation declared. Given the liquid, interconnected nature of global oil markets, it was not obvious why a Murmansk route would specifically benefit the United States over the long run, other than, perhaps, by providing an additional hedge against supply disruptions elsewhere. But the notion that direct imports by the United States from Russia would bolster geostrategic cooperation took hold at the highest levels of both governments, even among some officials who understood the fungible character of global oil markets. And Khodorkovsky emerged as the most active proponent of this vision in Russia’s private sector.

Khodorkovsky and Misamore believed their Murmansk vision enjoyed the full support of both the Putin and the Bush administrations. Sandy Vershbow, the American ambassdor in Moscow, met regularly with Misamore and encouraged him. Privately, Vershbow was ambivalent. He called Khodorkovsky “sometimes defensive and even threatening” after a private meeting in Moscow in the fall of 2002, where they argued about what sort of contracts should govern future tie-ups between American and Russian oil companies. Yet Vershbow, Vice President Cheney, and others in the Bush administration recognized that Yukos, under Khodorkovsky, was one of a handful of Russian oil companies that might be in a position to make a transformational deal.

On trips to Washington, Misamore met with senior officials on Bush’s National Security Council. “They were quite happy to have the diversity of supply,” he recalled, with a rising role for Russia, so as to “move away from the Persian Gulf dependency. The economics made a lot of sense because to the extent that you didn’t have higher shipping cost, that could be translated through in the costs of crude oil to the U.S. There was a great deal of support.”

It seemed increasingly uncertain, however, where Vladimir Putin really stood on the proposed American oil partnership. Putin thought about the security of energy supply much more as a Risk game player than did the free-market idealists in the Bush administration. He saw oil and gas pipelines as physical valves that he could open or shut as he sought to reward or punish other countries, at least within the former Soviet Union. Russian gas companies and ministries routinely squeezed supplies to customers in Ukraine if they were unhappy about regional finances. Surely Putin was complicit in those squeeze plays.

When he met Putin, Commerce Secretary Don Evans continually tried to impart what he considered to be basic concepts of free global oil markets, that the markets were interdependent, not something that should be conceived of as susceptible to the manipulation of physical supply. Evans was trying to make a subtle argument: U.S.-Russian cooperation would deepen because of oil partnership, but the supplier-customer relationship would be indirect, subordinate to the integrated global market. Putin, on the other hand, seemed focused on ties that would bind Russia and the United States together in a mercantile arrangement. He wanted to explore deals that would connect Russian supplies directly to the United States through long-term contracts and investments. He was interested, for example, in building liquefied natural gas facilities that would bind American importers directly to Russian supply. That was the kind of supplier position Russia enjoyed in Ukraine—Moscow controlled a valve that it could open or close.

“Mr. President,” Evans told Putin, “what you need to do is to quit thinking so much” about direct exports to the United States. The way to build cooperation was through joint corporate deals, investment, and shared participation in the global industry. “We are trying to open up supplies and get more out there in the global market. That’s the big deal. Just get it into the market. It will find its way to the highest price.”

Khodorkovsky retained UBS, the Swiss investment bank, to explore how to handle negotiations for the sale of a 25 percent stake in Yukos. Lee Raymond was interested in talking. He met with Khodorkovsky late in 2002 at a Bush administration–sponsored energy summit in Houston. Raymond told his colleagues that he found Khodorkovsky to be confident and knowledgeable. The Russian tycoon was probably getting himself too mixed up in politics, but it might be that he had little choice about that, given the intermingling of business and politics in his country.

“I’ll never sell so that you have a majority stake,” Khodorkovsky told Raymond, marking out the same position he had outlined for Browne.

Raymond said that was certainly Khodorkovsky’s prerogative, but in that case, there could never be a deal between Yukos and ExxonMobil. “I would never take a minority stake in Yukos if there wasn’t a clear way to become the majority owner,” Raymond told him.

ExxonMobil’s Russia watchers assessed that Khodorkovsky was increasingly anxious to pull cash out of Yukos. This gave them leverage, they calculated. Rex Tillerson interacted frequently with one of Khodorkovsky’s partners, Yuri Golubev, who began to formulate a way to strike a bargain: ExxonMobil would buy a 30 percent stake in Yukos, with the understanding that it would later go to the Kremlin to win permission for the sale of a majority stake to the American corporation. Whether this was a realistic reading of how Russian politics and oil deals worked was highly debatable, but it reflected the ExxonMobil way abroad: control, contracts, and irrevocable authorities granted at the highest levels.

Raymond pressed Khodorkovsky about whether he thought Putin would really approve of ExxonMobil taking a majority stake in Yukos. Khodorkovsky said he thought it could be done. Golubev, in his conversations with Tillerson, was more cautious about whether Putin would grant permission. It wasn’t clear whether Khodorkovsky was sincere or gaming them as part of his multifaceted efforts to sell a stake in Yukos. Raymond and Tillerson weren’t sure they could trust Putin, even if he said yes.

On June 14, 2003, Raymond and Tillerson flew to Saint Petersburg to meet with Khodorkovsky and others, and to participate in an energy conference in Moscow. At the conference, Khodorkovsky presented a lecture entitled “The Future Strategic Global Role of the Russian Oil Industry” in which he seemed to speak directly to Lee Raymond’s worries about whether a deal with Yukos would be secure. “The rules of the game are being established,” one of his slides declared. “We can now say that the Russian tax system as a whole has indeed stabilized and the interest that our Western colleagues now have in the stability of this system—since they are now playing on a level playing field, the same rules of the game as we are—give us confidence that this stability will last for quite a long time.”

Raymond talked again with Khodorkovsky. They both flew to Beaver Creek, Colorado, for the annual off-the-record World Forum staged by the American Enterprise Institute, the conservative Washington think tank where Raymond served on the board of directors and where Lynne Cheney, the vice president’s wife, had long worked on public policy matters. The Beaver Creek conference convened on June 19. Vice President Cheney flew out to attend a dinner of about a dozen people where Khodorkovsky was also present.

Raymond and the Yukos chairman held long discussions on the sidelines of the conference about ExxonMobil’s proposed purchase. The vision conceived around President Bush’s fire pit almost two years before seemed at last within reach.

The biggest sticking point for ExxonMobil remained whether Putin would give permission for the corporation eventually to take a majority stake in Yukos. That would be a major break with Russian precedent, a signal of a new era. Khodorkovsky and his team promised Raymond and Tillerson that they would lobby the Russian government. But they could not deliver the Kremlin’s permission up front. ExxonMobil should buy a minority stake first, and win Putin’s permission later.

“I’m never going to do that,” Raymond told the Yukos team. “I would need to have assurance from the government at the beginning.”

“This is not the right time to talk to the Russian government,” Khodorkovsky said.

Khodorkovsky was fencing through the negotiation—and talking simultaneously with David J. O’Reilly, the Irish-born chief executive of Chevron. It was far from clear who was gaming whom.

The Kremlin’s clan of “siloviki,” or security men, surrounded Vladimir Putin. The siloviki were a mysterious network of former K.G.B. and military led informally by former Interior ministry officers and a former military interpreter named Igor Sechin, Putin’s deputy chief of staff. The siloviki formed Putin’s base at the Kremlin, and yet the president also continued to speak and sometimes act in public as if he intended to transform Russia into a European democracy. “Putin thinks you can square the circle between capitalism and authoritarianism,” one of Khodorkovsky’s senior advisers at Yukos told an American visitor on July 1, 2003. “But you can’t.” The factionalism among ex-K.G.B. and other security men at the heart of Russian business and politics distorted decision making.

Yukos had moved into a new high-rise that spring; Misamore and his colleagues now worked in a cool, spartan, modern setting. The only way forward, Khodorkovsky had concluded, was to opt for “an American model” for Yukos, the colleague recounted in his fluorescent-lit office that July afternoon. True, there were those inside Putin’s Kremlin who would resist. “It’s a very real conflict,” the Yukos official said. “It’s not public yet.” Other oligarchs of Khodorkovsky’s ilk—Vladimir Guzinsky and Boris Berezovsky, among them—had already been served with arrest warrants, the latter’s earlier in 2003. The next morning, Russian authorities arrested Platon Lebedev, the chairman of Menatep and a major Yukos investor, on charges of defrauding Russia in a 1994 privatization deal. Khodorkovsky, too, was summoned for questioning, but released. The Yukos chief was on notice, but he plunged ahead.

The American embassy in Moscow cabled Washington to report that the detentions of Yukos leaders were a serious development, but one that would likely blow over: “Most analysts interpret the [government of Russia’s] actions as a warning to Khodorkovsky to reduce his high-profile involvement in politics, which has included significant contributions to political parties and speaking publicly of the need to ensure that the upcoming elections are successful in producing a Duma that will pursue the reforms he favors. . . . Most analysts believe Yukos and the Kremlin will step back and quietly resolve their differences, at least in the short term.”

The Bush administration’s energy diplomacy barreled ahead as well. In September 2003, Don Evans led a delegation of American energy executives to tour Russia in connection with yet another U.S.-Russian energy policy summit. Putin traveled to New York and celebrated the opening of a gas station in Manhattan owned by the Russian firm Lukoil, to demonstrate that Russian companies were investing in American markets, too.

Richard Grasso, then the chief executive of the New York Stock Exchange, invited about twenty American business leaders to meet with the Russian president while he was in New York, inside the exchange’s ornate headquarters at 11 Wall Street. Lee Raymond flew in.

After the general roundtable session with the American executives, Raymond and Putin met separately in private. The ExxonMobil negotiating team had decided that it would be best to find out directly from Putin whether the Russian president would be prepared to allow ExxonMobil to eventually acquire a majority stake in Yukos.

Raymond had told Khodorkovsky that he intended to speak directly with Putin about this; Khodorkovsky had discouraged him. The ExxonMobil team interpreted Khodorkovsky’s warning as only a negotiating tactic, designed to maintain Yukos’s leverage as the exclusive source of communication with the Russian government about the proposed deal.

Seated in a stock exchange conference room, Raymond told Putin about the negotiations with Yukos. He explained that if ExxonMobil were to make an investment, it would do so only if there was an agreement in advance that the American corporation could eventually take majority control.

ExxonMobil didn’t necessarily need to own all of Yukos, Raymond continued; if Russia wanted enough local ownership so that the company could be listed on a Russian stock exchange that would be okay. But ExxonMobil required a pathway to at least 51 percent ownership.

“You can basically decide how you want the other forty-nine percent,” Raymond told Putin, according to an account of the meeting later briefed to ExxonMobil executives. “Do you want the government to own it? Do you want it to be listed on an exchange? But before I get started, I need to have an understanding of our ability to get to fifty-one percent.”

It turned into a lengthy conversation. Putin talked expansively about the choices he faced in building oil pipelines to China, to feed that economy’s thirst for energy. He put a piece of paper on the table, sketched a map on it, and started drawing lines showing possible pipeline routes. He talked about whether a pipeline should cross to China above or below the Aral Sea. They also talked about coal—it turned out that Putin had studied coal as a graduate student.

As to ExxonMobil’s proposition, Putin asked Raymond, “If you have fifty-one percent, that means if I want to have Yukos do something, I’m going to have to come and talk to you?”

“Yeah, that’s not so awful,” Raymond answered. “That’s true in a lot of places in the world.”

“I’m not prepared to answer that today,” Putin said.

“I’m not asking you to answer that today,” Raymond told him. “You need to talk to your people.”

Khodorkovsky had also kept up his talks with Chevron, alongside those with ExxonMobil. The negotiations involved price and shareholding percentages, among other issues. As Bruce Misamore understood the terms, the discussions with Chevron involved some cross-ownership, whereby Yukos might acquire an interest in Chevron entities. With ExxonMobil, the terms under discussion were more one-sided, with ExxonMobil proposing straight up to buy an interest in Yukos.

Khodorkovsky asked Misamore which of the two American companies, Chevron or ExxonMobil, he would recommend as a partner. Misamore said that he felt Yukos’s style of operations “was far more analogous to Chevron.” It was more of a “laid-back culture.” Also, if they took on Chevron as a partner it would be “more of a mutual learning concept.” With ExxonMobil, by contrast, it “was going to be much more of a ‘We know what we are doing, we are going to tell you how to do it’ type of an approach.”

After the meeting with Putin in New York, according to a former senior ExxonMobil executive, “Raymond spoke quite optimistically about what he thought was going to happen.”

Lee Raymond’s remarks about what Russia would have to do to satisfy ExxonMobil may have grated on Putin, however. “The report that we got back later was that Putin perceived him as just totally arrogant and far too aggressive,” Misamore recalled. “And he just really was totally turned off by Lee Raymond—this big U.S. industrialist coming, and his arrogance, and telling the president of a country how things are going to be, almost. . . . Putin just was totally turned off by the guy—that was the report we got.”

On September 1, 2003, BP announced a partnership with a Russian firm to jointly hold oil assets as a new entity called TNK-BP. The deal was complicated, but it effectively transformed TNK-BP into Russia’s third- largest oil company, with a London-based private corporation as a major shareholder.

From Washington, Leonard Coburn, who was at the Department of Energy monitoring the Raymond-Putin talks, assessed that “Putin was a little scared” about what an ExxonMobil purchase of Yukos “would mean for him.” Here was an American-headquartered oil giant obviously tied to the Bush administration proposing to follow BP into a strategic Russian industry—the primary source of Russia’s national wealth.

Khodorkovsky’s private chartered jet pulled into a fueling terminal at the airport in Novosibirsk, in Siberia, in the early hours of October 25, 2003. The Yukos chairman was en route to inspect an oil field; he planned to gas up his plane and take off again. Masked agents in camouflage dress from the F.S.B., the successor to the K.G.B., stormed aboard in the darkness, their guns drawn. They grabbed Khodorkovsky and placed him under arrest. They flew him to Moscow, where prosecutors charged him with six counts of personal income tax evasion, overseeing corporate tax evasion, document forgery, theft, and other crimes.

The Prosecutor General’s Office announced that Khodorkovsky’s alleged crimes had cost Russia at least $1 billion in lost revenue. Khodorkovsky’s spokesman at Yukos called the accusations “absurd” and said the “brute force” used to arrest the chairman had been “humiliating for the whole Russia law enforcement system” in the eyes of the world.

The U.S. embassy in Moscow judged that Khodorkovsy’s arrest “almost certainly must have been done with Putin’s implicit or explicit approval,” and it showed “that the authorities may want not only to humble Khodorkovsky but to destroy him and even drive him out of the country.” Vershbow urged the White House to take action.

“The timing of the latest investigations . . . amid rampant speculation of an imminent deal with ExxonMobil or ChevronTexaco, and immediately following Putin’s U.S. visit—does not appear coincidental,” the ambassador wrote in late October. “Khodorkovsky has refused to back down from the start, and for a while thought that he had beaten back his persecutors. . . . He was wrong.”

Less than eight weeks after their meeting at the New York Stock Exchange, Vladimir Putin had given Lee Raymond his answer. Why did Putin authorize Khodorkovsky’s arrest? The latter’s maneuvering to buy allies in the Duma in advance of parliamentary elections scheduled for December 2003 was probably the biggest factor. “There was clear information that Yukos supported candidates who could have formed a real, sizable faction,” Milov recalled. “Putin is a person who is very influenced by these threats.” The TNK-BP merger announcement on September 1, followed almost immediately by Raymond’s discussion with Putin at the New York Stock Exchange, in which he sought a path to majority control, may also have inflamed Khodorkovsky’s rivals at the Kremlin. Khodorkovsky was negotiating with Chevron, too, the siloviki knew. “I saw these notes saying, ‘We might be losing our oil industry to foreigners in a couple of months completely,’” Milov said. “It was a kind of scare like that. This factor was involved. I wouldn’t say it was the ultimate trigger, because this is a very complex story. . . . It was a competition for influence in the country, for control over the country.”

Raymond spoke placidly in public about Khodorkovsky’s downfall. “Everyone ought to take a deep breath,” he said after the arrest. “Rome wasn’t built in a day. ExxonMobil wasn’t built in a day. This is a long-term industry.” He conceded that ExxonMobil had been interested in Yukos and had engaged in talks, but as to why it had fallen apart, “There are some things there I’m not privy to, in terms of the Putin-Khodorkovsky relationship. You know, I’ve got enough problems.”

In private, with colleagues and friends, Raymond could be more reflective, and even a little guilt stricken. He wondered if the advanced state of his talks with Yukos might have prompted or influenced Putin’s move against Khodorkovsky, he told friends and colleagues. The reality almost certainly was that Putin and Khodorkovsky were on a path of irreconcilable conflict, no matter what. For ExxonMobil, the arrest placed a punctuation mark on two bold but costly failures: The corporation’s search for shoot-the-moon purchases of oil and gas reserves in Russia and Saudi Arabia had now produced back-to-back zeros. There were those who blamed Raymond’s truculence and ExxonMobil’s general arrogance for contributing to the strikeouts, but even if Raymond were Prince Charming and his corporation played well with others, that would not alter the fact that Saudi Arabia had no trove of nonassociated gas reserves to sell and Russia’s government had no stable plan to secure foreign investment in its oil fields. If even one of these two plays had panned out, ExxonMobil’s reserve replacement challenges might have lessened in the decade ahead. Now the corporation would have to continue to scrap, and its reliance on places such as tiny Qatar and unstable West Africa would not ease anytime soon.

After Khodorkovsky’s arrest, Raymond telephoned Cheney and asked for a meeting. He had kept the Bush administration out of his negotiations during the summer of 2003. He now told the vice president’s office he didn’t want anything from the administration, but he felt he owed them an explanation about what had happened, from ExxonMobil’s perspective. Cheney suggested they meet away from the White House, at the vice president’s official residence on the grounds of the U.S. Naval Observatory, on Massachusetts Avenue. He and Raymond spoke for about ninety minutes. Raymond recounted the history of the failed deal; he and the vice president exchanged assessments.

When Bush administration officials contacted the Kremlin to raise concern about Khodorkovsky’s detention, Putin said that the rule of law in Russia had to run its course—wasn’t that what the United States said it favored?

On January 29, 2004, a Russian commission denied licenses to ExxonMobil and Chevron for drilling in offshore blocks around Sakhalin, blocks that they had leased in 1993. Secretary of State Colin Powell met with his Russian counterpart, Sergey Lavrov, and handed over a letter of protest on behalf of the U.S. oil companies. The Bush administration was still fighting for the companies’ prospects in Russia, but its campaign looked increasingly like a rearguard action, fought while in retreat.

“ExxonMobil and ChevronTexaco have invested approximately $60 million in exploration activities,” Powell pleaded. He continued:


The Russian government’s failure to issue a license to ExxonMobil and ChevronTexaco would hurt the climate for U.S. and other foreign investment in Russia’s energy sector and cast a shadow over Russia’s reputation for fulfilling its commitments. It would also raise serious questions about Russia’s commitment to our bilateral energy partnership. . . . It has been two years since our two presidents launched a strategic energy relationship. Since that time, we have not seen the concrete progress in the foreign investment climate for energy that our partnership was intended to promote.


As the months passed and Putin’s authoritarian retrenchment spread from media to oil deals to the direct suppression of democratic opposition, Bush and all of his advisers realized, sheepishly, that they had “drunk the Kool-Aid a little,” as Don Evans told his colleagues. Global oil prices rose; Russia’s government profited and felt less pressure to change. The Bush team concluded that as soon as Putin realized that rising global oil prices meant he did not need American or European capital to finance improvements in the oil sector, he reverted to autocracy.

After Evans left Bush’s cabinet, in 2005, his telephone rang at his office in Midland, Texas, where he had returned. German Gref, his former counterpart in the Commercial Energy Dialogue, during the years of optimism, told him that Vladimir Putin would like him to fly to Moscow for a visit. Evans agreed.

He found Putin alone in his office, except for his interpreter.

“I would like you to be chairman of Rosneft,” Putin said. Rosneft was the state-owned oil company Lee Raymond had examined and rejected on the grounds that it was a political labyrinth. Igor Sechin, the former leader of the Kremlin siloviki with which Mikhail Khodorkovsky had tangled, now served as an influential figure at the company. He was a beefy man with short, cropped hair.

Evans said that he was flattered and that he would think about it; he flew back to Midland. Putin called Bush to tell him about the job offer he had made.

This was the Putin they had all underestimated in 2001—the K.G.B. man whose idea of how to build an oil partnership with the United States was to provide a lucrative job to one of the American president’s best friends, at the head of a Russian oil company heavily influenced by the Kremlin. Putin’s offer also suggested ambivalence; he wanted both control and international credibility.

Evans thought about the offer for a few days, but never spoke to Bush about it. Some friends told him he was crazy to even think about it; others advised that he give it serious consideration. Evans told his friends that he did think a more globally integrated Russian energy industry could spur economic growth worldwide. He was also mindful of appearances. Gerhard Schroeder, the former chancellor of Germany, had embarrassed himself and his country by accepting a position on the board of Gazprom, the Russian gas giant, days after he left political office; he created the appearance that he and Germany were being paid off by Putin.

After a short period of reflection, Evans decided that working for Rosneft was not right for him. He telephoned Sechin, thanked him, but said he would have to decline.

Later, John Snow, Bush’s second Treasury secretary, found himself in a meeting with Putin where the subject of the job offer to Evans came up. Putin marveled at Evans’s refusal.

“You know,” he told Snow, “if he had taken that, you could have cut your C.I.A. budget in half!”

Putin misunderstood the American system as much as American analysts misunderstood him. Russian oil companies cut their deals from a position that was clearly subordinate to the state. In Putin’s worldview, the recruitment of a Bush friend like Evans to Rosneft made perfect sense. The converse proposition—the idea that ExxonMobil would recruit a Putin consigliere to its senior-most executive ranks in Irving, in order to solidify U.S.-Russian relations—was highly unlikely. ExxonMobil had never been an arm of the Bush administration’s Russia reset after 2001, events had demonstrated; it was a private global empire that would choose to align with Bush, or not, as its enduring interests required.

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