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I have an article in the March issue of the magazine about Ely Calil, a London-based international oil fixer (and friend, as I note in the story). Calil is one of the most interesting people I’ve met, and the story traces the arc of his career:
Calil belongs to a small group of
middlemen, a few dozen at most,
who quietly grease the wheels of the
global energy business, brokering
transactions between oil companies
and governments. The oil business
operates on the basis of discreet pay-
ments, transfers, and backroom
deals—not necessarily illegal—
arranged by ?xers like Calil. He has
funneled money to African dictators
to obtain concessions for oil companies, traded oil from Russia following
the collapse of the Soviet Union,
and advised presidents and exiled
political leaders. Along the way, he
has not only amassed an immense
personal fortune but has established
a web of political ties stretching from
Africa to the Middle East to the
The backdrop to the story is that much of the world’s oil reserves lie in the Third World, while being pumped and produced by First World multinationals. Hence, there’s really no such thing as a “clean” energy deal. “You’re trying to satisfy a lowest common denominator between two systems that don’t mesh much,” one former multinational executive, who worked in Angola among other places, told me. “Tribal systems are hierarchical, clan-dominated, dictatorial. It’s not always possible to marry that to a democratic system. There are always quid pro quos, even though sometimes the strings aren’t transparent.”
Straightforward cash bribes are still employed, but the means and methods of payoffs have become more complex over the years. Partly, that’s for legal reasons. The United States passed the Foreign Corrupt Practices Act in 1977, which outlawed bribery abroad. The Organization for Economic Cooperation and Development passed similar rules in 1997; up until then, many European countries allowed their firms to deduct bribes on corporate income tax statements (usually under the category of “commissions”). With the heightened legal risk, the greater public scrutiny of international business and the more sophisticated means governments have to monitor bank transfers, payoffs now take a multitude of forms. Indeed, while as opaque as before and serving the same purpose, modern day payoffs are not always illegal. “I spent 99 percent of my time trying to figure out ways to not technically violate the FCPA,” the former oil executive told me.
Back in July of 2004, the Senate Permanent Subcommittee on Investigations published a study that detailed the practices of seven oil companies in Equatorial Guinea. Mobil (before its merger with Exxon) gave President Obiang a stake in an oil trading business for a mere $2,300. Six years later, Obiang’s holding was valued at about $645,000. Exxon and Amerada Hess paid about $1 million to Sonavi, a private security firm headed by Armengol Ondo Nguema, Obiang’s brother, the country’s security chief and identified in State Department reports as a torturer.) Amerada Hess paid government officials and their relatives more than $2 million for building and office leases. About a quarter of it was paid to Obiang’s 14-year-old son. The report led to an SEC investigation, still open, which is to determine whether these deals violated the FCPA or fall within the law. Either way, the companies were essentially seeking to win favor, and contracts, by enriching Obiang and his cronies.
“Corruption isn’t endemic in the energy business because people in the industry are more corrupt or have lower morals but because you’re dealing with huge sums of capital,” Keith Myers, a London-based consultant and former BP executive, told me. “A million dollars here or there doesn’t make any difference to the overall economics of a project but it can make a huge difference to the economics of a few individuals who can delay or stop or approve the project.”
Edward Chow, a former Chevron executive, explained why fixers are so important to the oil companies. The process for awarding oil contracts and concessions in Third World countries is inherently politicized and centralized, he said, because mineral resources typically belong to the state and decision-making power is concentrated in the hands of a dictator or a small group. “In Texas, I can convince landowners to lease me their mineral rights. They get a royalty check every month and the companies leave a small footprint on their land. What’s not to love? There is no equivalent in places like Nigeria or Angola or Kazakhstan. You get the land but you don’t provide a lot of jobs, you may be destroying the environment, and most of the profit goes to international capital. The companies don’t have a strong case to sell to local communities, so they come to not only accept highly centralized government but to crave it. A strong man president can make all the necessary decisions. It’s a lot easier to win support from the top than to build it from the bottom.”
And as Calil himself told me, “Americans want their gasoline cheap. But it’s not possible without cutting a few corners.”I
Note: Steve Coll of the New Yorker wrote about the story earlier this week, which cited this condensed section:
That night in Paris, Calil’s destination was Spring, a popular restaurant in the ninth arrondissement that offers a set four-course menu to sixteenn diners nightly. Awaiting us at a corner table was Friedhelm Eronat, a close friend and sometime business parter of Calil’s…with two Russian models, one tall and blonde in a dark dress and knee-length black boots, and the other with dark hair and porcelain skin and wearing jeans…With the global financial markets now in crisis, the two men spoke of some old comrades who had fallen on hard times. “They’re all selling their yachts,” Eronat said with a grim look. One friend, an Uzbek named Sascha, “had $44 billion, and now he’s down to a billion.” “It happens,” Calil deadpanned.
More from Ken Silverstein:
Lucas Mann on hope and change in a minor-league-baseball city
Minimum number of baboons forced to smoke crack in a 1989 study testing the efficacy of cigarettes as a drug delivery device:
A reduction in distrust toward atheists was documented among pious Canadians who are reminded of the Vancouver police.
A Missouri cinema apologized for hiring an actor dressed in body armor and carrying a fake rifle to appear at a screening of Iron Man 3.
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