Caleb Brown: This is the Cato Daily Podcast for Tuesday, December 13, 2016. I am Caleb Brown. Rex Tillerson, the head of Exxon-Mobil, has been designated as President-elect Trump’s pick to be the next Secretary of State for the United States. While war is bad for business, Tillerson’s business interests have the potential to both help and hurt U.S. security goals. Cato’s Emma Ashford comments.
Emma Ashford: What we may expect from a Tillerson tenure of Secretary of State is, like almost everything in this coming administration, very uncertain. You know we don’t know with Tillerson whether he has private views or opinions on foreign policy that are distinct from the work he has been doing at Exxon for many years. So though he has quite a lot of experience in this field, he’s never really expressed a lot of interests on you know, American foreign policy. He’s never expressed opinions on which way it should go. So we just, part of it we don’t know if he’s very hawkish or not, we don’t know what his opinion is on U.S. alliances, on international institutions, on working with other states. There’s very little that we know about his foreign policy views.
Caleb Brown: Alright and that might make one a good businessman. It might make one a good diplomat.
Emma Ashford: Well, so there’s been a lot of criticism of the Tillerson nomination from the point of view that like a lot of Trump’s incoming cabinet, he has no experience with diplomacy and so he’s a bad pick from that point of view. I would say that’s very mistaken. Tillerson has been running a company that is the eighth largest company in the world. It is a company that is big enough that many people have basically argued that Exxon has its own foreign policy and he’s been involved in these really complex negotiations with lot of states to try and setup Exxon extraction operations in those states, often with countries that are very difficult to work with, and he’s had a lot of big successes on that front, too, in these negotiations. He’s successfully got compensation from the Venezuelan government from Hugo Chavez seizing Exxon’s assets. Most other oil companies didn’t manage that. And he has been successful in other areas, too. Like his ability to stay in Russia when a lot of other Western energy companies were being forced to leave, his negotiation managed to keep them in and keep Exxon’s profits in that area flowing, so he’s actually been a very successful negotiator as a CEO. That should translate, to some extent, into being a diplomat for the national interest.
Caleb Brown: So what interests does he have, or has had, as head of Exxon-Mobil that might cause problems?
Emma Ashford: That’s really where the rubber hits the road on this. Tillerson may be an effective negotiator, but he also has fairly big conflicts of interest. Even if he severs most or all of his ties with Exxon he will still retain massive stock options, he will still have a huge, I think a $17 million pension plan, and so he personally has a vested financial interest in seeing Exxon maintain its profits going forward. So there’s definitely going to be cases, particularly when we talk about countries like Russia, or countries like Iran, or even Mexico, where his financial interest might be somewhat different from what a Secretary of State should be doing in trying to achieve U.S. security interests.
Caleb Brown: But war is bad for business and you would hope that even if he does have conflicts with respect to his personal holdings and the kinds of things that he might be able to retain even as Secretary of State, you would hope that somebody with such a broad reach as Exxon-Mobil that taking these conflicts at face value, that would actively oppose conflict.
Emma Ashford: That is actually true. And one big difference between Tillerson and almost every other nomination that Trump has made so far is that he doesn’t appear to be very hawkish on the Middle East, and particularly very hawkish on Iran. Now, we don’t know. Privately Tillerson might be hawkish on Iran, but he certainly never said anything to that regard, in contrast to almost everybody else in Trump’s incoming cabinet, on his National Security Council, all of whom have said they want to take a harder line on Iran. So that’s one area where he might actually be a good influence on the new President.
Caleb Brown: What about sanctions on Russia?
Emma Ashford: This is one of the really interesting cases, right? So there has been a lot of talk in the media about how Tillerson is very good friends with Vladimir Putin and this clouds his judgment. I’m not so sure that’s true. To be a businessman in Russia, you need to keep the government and the high officials happy. And Tillerson has undoubtedly been very good at negotiating those deals inside Russia. Where the problem arises is not that he might be friends with Putin, the problem arises from this conflict of interest again. Exxon-Mobil has lost almost a billion dollars so far from the U.S. European sanctions on Russia. I think there’s estimates that they could lose up to $3 billion if those sanctions aren’t lifted at some point, so Tillerson has a personal financial interest and some interest in terms of loyalty to the company he has worked for for many years in seeing those sanctions lifted as soon as possible. He has been a frequent visitor at the White House and the Treasury over the last couple years, lobbying for those sanctions to be lifted or just — so I suspect that even shifting into his new role he will be very keen to see those sanctions lifted and perhaps not in a process or through a process that will actually help to stabilize things in Central and Eastern Europe.
Caleb Brown: What you are saying seems to differ strikingly from what I hear on television and read in newspapers, which is that his lack of experience in government is a big issue and that there will be a fight over his nomination. Do you think that the fight over his nomination will be based on the kinds of things that you have talked about, or based on, I guess, less important considerations?
Emma Ashford: That’s the thing that really concerns me. So, in addition to all these comments about his lack of experience, we have got a lot of Senators talking about his ties to Russia and how concerning they are, and so on both sides of the aisle there is actually a lot of opposition to this nomination, so we would expect it on the Democratic side of the aisle, right? The Democrats have been very clear that if Tillerson were nominated they are going to turn this into a nomination battle over climate change policy. And that’s to be expected. But the Republican side of the aisle are also suggesting that they will oppose Tillerson. And that’s much more surprising for them to oppose their own President-elect’s nomination. And they are arguing that it’s his ties to Russia are dangerous, his lack of experience is dangerous, and I think they are really going to turn this into a very public discussion on what U.S. policy towards Russia in a Trump administration will be.
Caleb Brown: Emma Ashford is a research fellow at the Cato Institute. Subscribe to this podcast at iTunes, Google Play, and with Cato’s iOS app. And follow us on Twitter, @CatoPodcast.
