WikiLeaks cables show oil a big focus of U.S. diplomats

By Kevin G. Hall
McClatchy Newspapers

WASHINGTON — In 2006, three years after the Russian government had charged Mikhail Khodorkovsky — then the country’s wealthiest businessman — with fraud and moved to break up his Yukos oil company, U.S. diplomats had had enough.

Gazprom, which grew out of the former Soviet Union’s state gas ministry, had been busy buying up Yukos’ far-flung empire, stoking American fears that soon Russia and its tough leader, Vladimir Putin, would control virtually all of the natural gas flowing to Europe.

The United States wanted to stop that from happening. So the American embassy in Slovakia hired a Texas-based oil consultant and began secretly advising the Slovakian government on how to buy the 49 percent stake Yukos had held in Transpetrol, the Slovakian oil pipeline company.

With no oil experience of its own, the Slovakian government didn’t know how much it should pay. The consultant, who sat in on the negotiations, assured Slovakia’s economy minister, Lubomir Jahnatek, that the $120 million price offered to the group disposing of Yukos’ assets was a bargain. Gazprom was willing to pay far more.

“We have made it clear to all parties that we do not want to publicize our role as technical advisors,” the embassy said in an Aug. 10, 2006, cable that outlined what eventually became a deal. “Jahnatek is clearly appreciative of the input provided by (the consultant), and will continue to look to him and the U.S. embassy for information as he faces the challenges to the deal in the coming weeks.”

The communication, part of the cache of State Department cables that WikiLeaks passed to McClatchy Newspapers and other news organizations, is just one indication of how the U.S. government over the years has maneuvered to influence the world’s oil and natural gas markets.

With oil trading near $100 a barrel and gasoline near $4 a gallon at the pump, Americans can take solace in knowing that securing sources of oil has been a chief focus of U.S. embassies across the globe for years.

Of the 251,287 WikiLeaks documents McClatchy obtained, 23,927 of them — nearly one in 10 — reference oil. Gazprom alone is mentioned in 1,789.

In the cables, U.S. diplomats can be found plotting ways to prevent state entities such as Gazprom from taking control of key petroleum facilities, pressing oil companies to adjust their policies to match U.S. foreign policy goals, helping U.S.-based oil companies arrange deals on favorable terms and pressing foreign governments to assist companies that are willing to do the United States’ bidding.

Sometimes the U.S. approach seems mystifying. An Aug. 17, 2009, secret cable from the U.S. embassy in Riyadh, Saudi Arabia, recalled how days earlier the U.S. charge d’affaires, Richard Erdman, pushed Saudi Arabian Oil Minister Ali al-Naimi to get closer to China.

But there was an ulterior motive. At the time, the United States was trying to persuade China to back sanctions against Iran over the country’s nuclear fuel enrichment program. The U.S. believes the program is part of an Iranian effort to develop nuclear weapons. “We wouldn’t mind seeing Saudi sales replacing some of Iran’s oil exports to China. This would have the welcome side impact of reducing Iranian leverage over China,” Erdman told al-Naimi in a cable.

Al-Naimi responded that Saudi Arabia, a bitter rival to Iran, would soon be the largest oil supplier to China, and it came to pass. In 2010, Saudi Arabia was the top oil supplier to China. Iran was third, according to the Chinese website ChinaOilWeb.

A July 30, 2009, secret cable from the U.S embassy in Riyadh recounts how Treasury Secretary Timothy Geithner, while visiting the kingdom, leaned on his Saudi counterpart, Ibrahim al-Assaf, to contain rising oil prices.

“Geithner said that it would be positive for the global recovery if oil prices did not rise further, whether from speculation or OPEC production,” the cable said, noting that Geithner admitted “that the U.S. had not found a ‘good way’ to limit oil-price volatility.”

The documents also show how in their global hunt for oil, companies from allied countries and foes alike complicate U.S. policy objectives.

One target of repeated U.S. ire is the Rome-based oil giant Eni, Italy’s largest corporation and one in which the Italian government holds a 30 percent stake. Both efforts to expand its presence in Iran and its close ties to Russia’s Gazprom are frequent topics in the cables.

“Eni CEO Paolo Scaroni told the ambassador that the Iranian energy minister has offered Eni investment opportunities in Iran’s South Pars and Azadegan oil fields,” said a secret cable from the U.S. embassy in Rome dated Jan. 12, 2007. “Scaroni said Eni is interested in additional investment in Iran so long as there are no multilateral sanctions against Iran in effect, Iran pays money owed Eni under existing contracts, and the investments are structured so that Eni’s return is based on world oil and gas prices.”

The embassy was particularly unhappy that Eni sought to structure its new business in Iran in such a way that it could claim that Iran was merely repaying old debts owed to the company, some dating to the 1950s. That would allow Eni to help Iran develop the fields and skirt any sanctions imposed over Iran’s nuclear program, which the U.S. believes is intended to develop nuclear weapons.

The embassy urged U.S. officials in Washington to lean on Scaroni during an upcoming visit to squelch any deal. A subsequent cable indicates they did.

Scaroni was poised to try again with the Obama administration, according to a May 5, 2009, account of a meeting with another Eni official. “Post thinks there are good reasons for USG skepticism on this request,” the cable said.

Eni’s ties with Gazprom were the subject of an April 24, 2008, cable that urged the State and Treasury departments to express displeasure very clearly to Scaroni.

Specifically at issue was an Eni deal that would have given Gazprom access to Libyan oil and would have had Eni help Gazprom build a pipeline across the Black Sea. This project would have competed with a similar project backed by the U.S. government that would have connected gas fields in the Caspian region directly to Europe, bypassing Russia and Gazprom.

At the time, Silvio Berlusconi was about to become Italy’s prime minister for a second time and the embassy urged headquarters to twist his arm as well.

“Post would like to push the new Berlusconi government to force Eni to act less as a stalking horse for Gazprom interests … seems to be working in support of Gazprom’s efforts to dominate Europe’s energy supply, and against U.S.-supported E.U. efforts to diversify energy supply,” the confidential cable said.

Eni has been in the news of late because it’s the largest player in Libya’s oil sector and Scaroni publicly voiced concern that U.S.-led efforts to oust strongman Moammar Gadhafi weren’t in Italy’s interest. On April 20, Scaroni announced that Eni was temporarily shelving its deal in Libya that would have given Gazprom a big stake in Libyan oil, a move the leaked documents show the U.S. had been seeking since 2008.

Sometimes, however, U.S. efforts were aimed at unleashing Russian oil.

A secret cable from Moscow dated April 16, 2009, tells how Houston-based ConocoPhillips planned to join the Russian firm Lukoil in bidding on oil contracts in Iraq. The joint effort in Iraq had the blessing of Putin, ConocoPhillips officials said, who noted that Putin had offered to provide debt relief to Iraq if the U.S.-Russian consortium were granted a contract.