Why We Need Big Oil

BP might not be anyone's favorite company right now, but it's our best hope against the world's oil-rich troublemakers.

In the aftermath of the largest oil spill in history, Big Oil -- never the greatest of PR cases -- has lost most of the few friends it ever had. When BP -- whose assets stretch from Azerbaijan to Libya to the Alaskan Arctic -- announced last month that it was planning to shrink in size after its huge losses from the Deepwater Horizon disaster, selling off at least $30 billion worth of its assets in places like Texas and Vietnam, it accordingly received little sympathy. Even those who don't actively hate BP tend to argue that a bit of streamlining might do it some good, producing a more effective and competitive oil company -- or even that the company's pieces are worth more than BP itself at this point.

That's a crude analysis. The shrinking of Big Oil should neither be cheered nor cautiously welcomed. Much more is at stake here than schadenfreude and corporate efficiency. If Big Oil is rolled back, so is Western influence in global energy markets -- and you won't like the people who fill that power vacuum.

The talk of the town in Houston today is leaner, meaner, greener supermajors. ConocoPhillips has benefited recently from trimming fat, selling off some assets while cutting staff, and BP is hardly the only company in the post-Gulf-spill world adopting a strategy based on this faddish principle. But in truth, Big Oil is really not that big to begin with. The six supermajors only hold about 5 percent of global oil and natural gas reserves. The rest are controlled by governments: some like Norway's democracy, but most like Equatorial Guinea's Teodoro Obiang. Even a third of a century after the OPEC embargo, the oil business's biggest problem is still resource nationalism: incompetent, capricious, and geopolitically malicious governments that use energy as a weapon or a plaything.

It was this imbalance of power that motivated BP, once one of the leanest and meanest of the majors, to expand during the tenure of outgoing CEO Tony Hayward's predecessor, John Browne. In the early 1990s, the company's reserves were quickly dwindling in some of the most politically inhospitable parts of the world; Browne's ambitious strategy was to grow the company so that it could survive. BP's aggressive swallowing of pedigreed American companies Amoco and Arco, and the ill-fated merger with Russia's TNK in the late 1990s and early 2000s, kicked off the merger mania that created the supermajors we know today: Exxon-Mobil, Chevron-Texaco, Conoco-Phillips and Total-Petrofina-Elf.

The mergers occurred because consolidating private companies was the quickest and easiest way of growing reserves in a world where most of them were off limits, possessed by national oil companies and petro-oligarchs. Merger plans were adopted not because of the monopolistic tendencies Big Oil is often accused of having, but because they would allow companies to acquire greater reserves without the high costs of exploration -- why look for new oil when you can just buy another company's?

After the merger mania went as far as it could in the first half of this decade, Big Oil cautiously returned to the hunt for new untapped reserves. But it was once again blocked by the national oil companies and the governments that oversaw them, who already owned most of the world's easy-to-access oil. So the supermajors have for almost a decade been forced to look for deepwater "elephants": highly lucrative, but also potentially risky fields, accessible only with the technology and expertise that Big Oil can provide.

The shrinking of Big Oil after the gulf spill will only reinforce this trend, as the supermajors streamline to focus on this sort of high-risk, high-payoff exploration. Even with stepped-up regulatory safeguards, the pillorying of BP will have the perverse effect of increasing the likelihood of another catastrophic spill. The next target for deepwater drilling is the Arctic. Why? Because national boundaries are fuzzy up there and only the supermajors have the technology to work in such a harsh environment. Get ready for oily polar bears and blackened seals.

If the free market could reach the world's abundant easy oil, these sorts of gambles wouldn't be necessary; global production would increase, and prices would be less volatile. But thanks to the poor management of the world's mostly nationalized oil reserves, the exact opposite is happening. Production of oil and gas in Iran is significantly less than it was before the 1979 revolution. The same is true of production in Venezuela since Hugo Chávez took power in 1999. After the sometimes violent de facto nationalization of energy assets in Russia over the past decade, the growth of oil production there fell by 80 percent. Until recent changes in all three countries, resource nationalism in Saudi Arabia, Iraq, and Libya meant stagnant production for over three decades. Demand for oil may be down in the United States and Europe, but China and other emerging markets remain thirsty. While Beijing may cut mercantilist deals with oil producers, many emerging and advanced economies will continue to rely on the shrinking supermajors' deepwater oil.

Big Oil was the result of the geopolitical problem of nationalization. BP's fear in the 1990s was that if it didn't grow by the few means it had at its disposal -- absorbing smaller players and placing high-stakes exploration bets -- it would turn into little more than an oil services and trading company that couldn't compete on the oil patch, or on Wall Street. In the aftermath of the gulf oil spill and a fire-sale of its assets, the company is facing the same threat again.

If the shrinking virus spreads to the rest of the supermajors -- as many analysts suggest it will -- the story will switch to their diminishing heft in negotiations with problematic petrostates. That means less energy security for U.S. and European consumers, and more geopolitical shenanigans by some of the world's most unsavory characters.



Grand Strategic Failure

Why Charles Hill's new book is as morally suspect as his entire career.

"When I asked [Charles Hill] why he had never written his own big book he only smiled," notes his former student Molly Worthen in her 2007 book about him, The Man on Whom Nothing Was Lost. "There was no better way to get people to pay attention to ... your take on history, he explained, than to write ... beneath the byline of Henry Kissinger, George Shultz, and Boutros Boutros-Ghali. After all, who had ever heard of Charlie Hill?" But Hill, a former diplomat and senior advisor to a string of powerful men, wasn't being quite truthful with Worthen, and not only because he would soon publish an ambitious take on history under his own name.

Worthen's title quotes Homer's characterization of the wily Odysseus, whom Hill now presents as a master of the "creative dissembling" that he believes diplomats must undertake beneath the protocols of their profession, sometimes violating the truth and their superiors' trust. Hill's stated aim in Grand Strategies is "the restoration of literature as a tutor for statecraft," and he ranges from Homer through Salman Rushdie to argue for literature as a "supreme way of knowing" the world of diplomacy. He alsocalls the book "a primer" for Yale's richly funded, foreign-policy-oriented "Studies in Grand Strategy" program, which counts him as a "distinguished fellow" and "diplomat in residence."

But these literary and pedagogical claims shade over some highly personal motivations. Reading his own experiences back into a tapestry he weaves from a selection of great books, Hill interprets great literature and historical episodes to show that statesmen such as Albrecht von Wallenstein, Cardinal Richelieu, Charles Talleyrand, Oliver Cromwell -- and their confidential note-takers and informal envoys, Hill's own predecessors, such as Richelieu's Père Joseph and Cromwell's John Milton -- "possess a certain mad, enigmatic quality" and are amoral by conventional standards because they think that they can keep order only by shuttling back and forth across bounds of convention. Hill's own history as one of the Reagan officials whose silence compromised the federal investigation of the Iran-Contra scandal makes his attempt at self-justification clear.

Very occasionally, Hill comes close to tipping his hand. Although he never mentions that he worked for Kissinger, the former secretary of state shows up, bizarrely, in Hill's discussion of Milton's Paradise Lost as a contemporary exemplar of the fallen angel Mammon, who exhorted Satan's hosts to, as Hill puts it, "adapt to the conditions of Hell" and "seek to prosper." And Shultz shows up in the book (as he actually did in real life) lecturing a hostile audience of writers at the New York Public Library in 1986 by invoking the literary critic George Steiner -- in words almost surely written by Hill, who was crafting Shultz's public utterances at the time.

Beyond these more obvious connections, the book's long skein of plot summaries and potted histories of more than 20 great novels and plays depict diplomats devising duplicitous and desperate strategies behind thin veils of diplomatic protocol and immunity to restrain the blood-dimmed tide in a Hobbesian world. Inevitably, he writes, the veil-shifters' motives are "mixed, their characters ambiguous, and their drives possibly abnormal. In the end, their achievements may be inexplicable."

Thus Odysseus, sent to persuade Achilles to re-join the fight against Troy, violates "two fundamental rules of diplomacy" by softening Agamemnon's message to Achilles and by not fully reporting back Achilles's response. The reason, Hill explains, is that an emissary, encountering his hosts' circumstances and reactions in ways his superior cannot, must adjust his message, his reports back to headquarters, and perhaps even his own side's strategies and goals in ways his superiors might not fully understand or approve.

Centuries later, the great Hapsburg general Wallenstein's "grand project" of the 1630s -- Hill calls it "a Europe ... unified under the concept of religious tolerance" -- produces his own murder but also the Treaty of Westphalia, Hill's Rock of Gibraltar for world order. Hill finds Wallenstein's greatness in the fact that when "he cannot lead his own side to accept this cause, he secretly conspires with the enemy to do so." His counterpart Richelieu, Louis XIII's "grand strategist," also pursues a course so circuitous that, "once freed from religious and ideological concerns ... [it] prolonged the [bloody Catholic/Protestant Thirty Years' War], ruined the Holy Roman Empire, and enabled France's rise to paramount power." Again, Hill approves, because only the Westphalian state system, however fraudulent, prevents endless carnage.

The book indulges a peculiar attraction to that carnage in what Hill acknowledges is his dark vision of human nature. As a Brown University student in the 1950s, he was mesmerized by Hans Jakob von Grimmelshausen's 1668 picaresque fantasy novel, Adventures of Simplicissimus. It was "like finding oneself within the deranged chaos of a painting by Hieronymus Bosch. All is swirl of lusting, murderous, satanic satire," Hill writes in Grand Strategies. Hill uses the word "lust" several times in connection with violence, especially "revolutionary" violence; no instance of religious or fascist savagery provokes him as much as progressive efforts to re-make history. He loves Dickens's A Tale of Two Cities because it damns the French Revolution, and he shares Dostoyevsky's horror that partisans of the Enlightenment "did not desire better men.... They would cut off the heads of Shakespeare and Rafael." Better to rely on the leaders of warring states, and the amoral diplomats who enable and sometimes temper their work.

Reading between the lines of this book, it's not hard to understand how Hill's own career as a diplomat was marred, and ended, by too much diplomatic creative dissembling. Iran-Contra Independent Counsel Lawrence Walsh had "heard of Charlie Hill" well before he decided to collaborate with Worthen on her book and then to write this one. As Michael Desch explained in The American Conservative in 2008, "Hill was forced to resign from the Foreign Service after it became clear that he had concealed evidence of Shultz's extensive knowledge of the Iran-Contra scandal from federal agents."

Walsh's final report of 1993 -- on how American officials secretly funneled the proceeds of illegal arms sales to Iran to right-wing insurgents in Nicaragua -- establishes that although Hill and Shultz opposed the Iran-Contra scheme, bureaucratic self-interest kept them from trying to stop it. In congressional testimony written by Hill, Shultz lied about what they'd known and when, compromising the public investigation but giving Reagan plausible deniability. By not telling the president or the public the truth about the scandal, Shultz and Hill hoped also to avoid retribution by top Reagan aides. As the report goes, "Independent Counsel concluded that Shultz's testimony was incorrect, if not false, in significant respects and misleading, if literally true, in others, and that information had been withheld from investigators by Shultz's executive assistant, M. Charles Hill."

Now Hill wants us to consider their mix of conviction and evasion a strategy worthy of Odysseus. Worse, the approach has become a template for his teaching of the classics to freshmen and Grand Strategy students "by verdict" and as "a priest," according to Worthen. At Yale during the week of 9/11, his  apparent certitude reminded many of Mayor Rudolph Giuliani's in New York. "This is an act of war," Hill told shaken students the morning of the attacks, "and that requires you go to war." Three days later he put his name on a public letter to President George W. Bush by the neoconservative Project for a New American Century, urging that "even if evidence does not link Iraq directly to the attack ... the eradication of terrorism ... must include a determined effort to remove Saddam Hussein." Two years later, Hill was a strong advocate for the Iraq war, addressing Yale students more as a Foreign Service spokesman or the headmaster of a military academy than as a professor of liberal education.

Now Grand Strategies confirms, unintentionally, what I suspected then: that Hill's and Giuliani's public performances were sublime because they'd been rehearsing for 9/11 for most of their lives, Hill since internalizing Simplicissimus at Brown and Giuliani since founding his high school's first opera club. On 9/11, Manhattan became as operatic as the inside of Giuliani's and Hill's minds, a stage fit for a dark, nationalist epic by Verdi or Puccini, with bodies strewn about and the noble hero grieving for his people in a new dawn. These two adepts of classical culture rose to the occasion separately, but they bonded in 2008, when Giuliani named Hill the chief foreign-policy advisor of his presidential campaign, which hammered away at what they dubbed "the terrorists' war on us."

Here, though, as in Iran-Contra, our wily Odysseus would keep on dissembling. In an interview in 2008 with the Yale Daily News, Hill said that he'd didn't know how his name had gotten on the letter to Bush and that he'd tried to get it removed. A response posted on the newspaper's website by PNAC executive director Gary Schmitt refuted him decisively, closing with, "Sorry, Charlie."

"Only literature, Hill claims, is "methodologically unbounded" enough to show "how the world really works." But Hill has stacked the deck by starting with a highly specific notion of "how the world works" and interpreting literature to suit his paradigm. A more serious literary survey might show how writers such as Reinhold Niebuhr or Jurgen Habermas and their counterparts in fiction address recent shifts in popular beliefs about power and legitimacy that have brought down armed regimes -- the British in India, Afrikaners in South Africa, segregationists in the American South, and the Soviets in Eastern Europe -- with very little carnage. Jonathan Schell's The Unconquerable World, published in 2004, shows how world literature and history can help explain such shifts.

Early in Grand Strategies, Hill offers a chilling metaphor for his vision. He writes that he was transfixed by the gaze of the ancient Greek priest and emissary Laocoon as he and his sons are strangled by serpents in sculpted marble, "the first artistic depiction of the anguished reaction of a body to painful defeat.... For me it is a look that can be seen across the ages,.... whether the face is contorted in pain or in calm contemplation, of one who can... see clearly into the [tragic] essence of things." The classical tragic hero's gaze into the abyss is, "rightly understood ... a matter of Grand Strategy."

But the man on whom nothing was lost has missed liberal education's responsibility -- and its unmatched capacity -- to inspire an ethic richer than grand-strategic amorality amid perpetual conflict and mistrust. Instead, he has written Grand Strategies and is teaching the classics at Yale to show young Americans how to wield power and risk destruction with Laocoon's pitiless, gnomic gaze.

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