Article by Peter Maass

Inside the Soul of an Oilman

The Big Money  |  September 22, 2009
Are petro-execs intrinsically more corrupt than other businessmen?

The following excerpt from “Crude World” was published by TheBigMoney.com.

I liked most oil executives I have met. They were hardworking men with a thrill for the deal, a fear of failure, and a moral compass that occasionally responded to the force of self-preservation; the compass did not always point in a moral direction. They were flawed, but that meant they were like the rest of us, using masks and shields in their real-world dealings. They might be one thing at the office, perhaps believing in the institution that employed them, perhaps not believing; and they might be something quite different outside the office.

Gabriel Nguema, the son of one of the world’s worst dictators, Teodoro Obiang, had a reasonable perspective on the oilmen who marched through his office at the Ministry of Mines, Industry and Energy in Equatorial Guinea. “Somebody in a company told me that when you work in this company you take your brain out and you put this box in,” Nguema said. “Once you return to your house you put your brain back in. So you don’t follow your feeling of what people need, you just follow what the company tells you.”

Nguema was on to something, though he didn’t attempt a broader application of his observation. Oilmen had the same business DNA as executives in other industries. Buy low, sell high, keep your job. The main difference arose from the unusual conditions in which oilmen competed. If you want to alter the behavior of an executive who usually follows the highest ethical standards, just give him a briefcase and tell him that his job depends on his winning an oil contract in a country that is not Norway. In this scenario, an executive from Apple would not be dispatched to Boston to sell MacBooks to an eager client whose accounts are examined by the IRS and the SEC. Instead, he would be sent to Baku to win drilling rights to one of the fields that were up for grabs in the 1990s. The man from Apple would find himself in the crazy Skinner box that was Azerbaijan in the 1990s. It is impossible to understand oilmen if you do not understand the box.

In Azerbaijan, Western oilmen were competing for an initial round of contracts that involved paying at least $7 billion to develop offshore fields in the Caspian Sea from which a million barrels of oil would be extracted on a daily basis by 2010. Combined with contracts for other fields and a transnational pipeline, the total value of the contracts would reach tens of billions of dollars; the revenues from the oil would be substantially higher. The competition for the Caspian basin was billed as the last great oil rush of the modern era, though it would not be the first time a fortune had been made in Baku. In the late 1800s, France’s Rothschild family and Sweden’s Nobel brothers built their financial empires from the oil of Azerbaijan, which at the outset of the 20th century produced half the world’s petroleum. As the Soviet Union fell apart nearly a century later, the door reopened to foreign companies whose technology could extract crude that was beyond the reach of Soviet expertise. A crack team of behavioral psychologists could not have concocted a better environment for bringing out the worst in their human subjects.

The experiment in Baku, Azerbaijan’s capital, was centered at the Intourist Hotel, which by the 1990s had not been burdened with much maintenance since its construction in the 1930s. The Intourist was the only place foreign oil executives were allowed to stay as they wined, dined, and negotiated with ministers, middlemen, and warlords who might possess the power to issue exploration contracts. The hotel, a five-story brute, was located on the aptly named Neftchiler Prospekt—Oilmen’s Avenue. Tantalizingly, hotel residents could see, from their balconies, the derelict rigs that dotted the waterfront, visual cues to the huge fields that were farther offshore.

The oilmen did not have the Intourist to themselves. The hotel also played host to mercenaries from America and Afghanistan who were fighting in Azerbaijan’s war with Armenia. In the early 1990s, this was the unfinished business of the Soviet collapse. And among the guests were diplomats, spies, and journalists reconnoitering this newest and shakiest of nations. When the American, British, Turkish, and Russian governments initially set up their embassies in Azerbaijan, all were located in the Intourist Hotel. (Because space was so tight, the British Embassy began its operations in the offices of British Petroleum.) Everyone was trying to figure out what everyone else was doing, who was meeting whom, what was being said, who was telling the truth, who was working a con, and who was spending time with the perfumed women of the evening in the basement tavern that some guests referred to as Ho Bar. There was an unseen witness to everything said—the Azeri security services, a thriving vestige of the KGB, which had wired the hotel from top to bottom. Going outside was one way to avoid listening devices, but at times it was too perilous to try that, because crime and political instability made the streets dangerous at night and, occasionally, during the day, too.

The representatives of BP, Amoco, Pennzoil, Unocal, and lesser outfits squeezed into this squalid box. Because the hotel’s services varied from sporadic to absent, the oilmen imported, on their corporate jets, things like breakfast cereals, printer paper, and bottles of Johnnie Walker, so that they could enjoy a shot or four at the end of the day and not wonder whether it had been diluted with antifreeze by the waiters at Ho Bar. Phone lines were assumed to be tapped by the Azeri KGB or rival oilmen who wanted to know who their competitors were talking to and what they were saying.

I visited Baku a few years ago and talked to oilmen who recalled the Intourist with an I-was-there horror—a visceral badge worn by survivors of momentous events. “We knew that all our rooms and all of our phones and all of our cars were bugged,” one told me. “We would have a conversation in a car and within 24 hours a friend would come up and tell us exactly what we said. We would do silly things, too—we’d say we needed to meet one of the heads of a political party but we couldn’t find him, and we’d just announce it in an empty room.” Because the walls were bugged, the announcement was heard by the hotel’s eavesdroppers. “And 20 minutes later, the manager of the hotel would say, ‘Would you like to meet with so-and-so?’ ”

Sensitive documents could not be left in the rooms; everything of competitive interest was carried in locked briefcases or protected by guards standing outside the living quarters of executives when they had meetings elsewhere. No one could be trusted, including the ministers and bureaucrats who represented the government of the moment, until Heydar Aliyev consolidated his hold on power in the mid-1990s,

Azerbaijan endured a dismal reign of warfare, petty violence, utter poverty, and a succession of leaders who were no better than Mafia chiefs. How do you negotiate in such circumstances? One of the representatives of the government was a shady Slovak businessman who was never seen without a pistol strapped to his waist—and who once pointed the gun at the head of an executive he was negotiating with. Confidential bids leaked out almost the moment they were presented to the government, because there was always a midlevel bureaucrat who augmented his meager salary by showing company X’s offer to company Y. “You make a supposedly confidential proposal and the next thing you know it has been shopped out by someone,” an executive told me. “It’s several Rolaids a day, every day.” Contracts would be signed one day, bottles of champagne would be opened in celebration—and within days the contracts would be declared null and a signing ceremony would be held with another company.

Many executives I spoke with outlined the maddening pressures weighing upon them yet denied any personal unethical activity. Their competitors, they added quickly, were breaking the rules all the time. Apparently all oilmen in Baku were breaking the rules except the ones who were telling me that everyone was breaking the rules. What I knew for sure was that an Apple salesman would fail unless he adapted his sales tactics to the horrible box that awaited him at the doors of the Intourist Hotel.

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