Exxon hires ex-U.S. officials to navigate Iraq

BAGHDAD - When ExxonMobil signed six oil deals with the semi-autonomous Kurdistan Regional Government (KRG) in October 2011, then-U.S. Ambassador to Iraq James Jeffrey was forced to manage the aftermath.

Jeffrey was furious. A veteran diplomat serving his final two years in the foreign service, running the largest-ever American embassy, he held heated conversations with company and government officials and foretold the problems Exxon would face, according to people in the State Department, Exxon and the KRG.

Now he's been hired to help the company he once scolded, as it attempts to manage a crisis that could either be resolved, resulting in a profit-making oil bonanza, or worsen into a conflict capable of rupturing the country.

Jeffrey joins the ranks of other top diplomats and government officials who have signed lucrative consulting deals with Exxon and other major multinational energy companies, capitalizing on their contacts and their niche understanding of terrain that is far away from executive boardrooms.

"It's big names," said one source close to Exxon. "Jeffrey is just the latest addition."

According to multiple sources with direct knowledge of the company's consultants, Exxon has also hired former National Security Advisor and Secretary of State Condoleezza Rice, as well as Stephen Hadley, who replaced Rice as National Security Advisor after serving as her deputy during the George W. Bush administration. They are two of the three principals in the strategic consulting firm RiceHadleyGates, which also includes former Defense Secretary Robert Gates.

Rice and Hadley have been consulting Exxon "on Iraq, and the broader region as well" since at least 2011, said one of the people familiar with their contributions to the company.

Exxon has also retained the services of another high-profile former U.S. government official, Ryan Crocker, who served as American ambassador to six troubled countries beginning in 1990, including Iraq from 2007-2009 and Afghanistan from 2011-2012. Crocker was a consultant and advisor to Exxon between his Iraq and Afghanistan posts – he was officially retired during that period – and has re-started since leaving Afghanistan last year, according to multiple sources.

None of the three – Rice, Hadley, or Crocker – advised Exxon on the KRG contracts, the source said.

All three, and Jeffrey, declined to comment, as did an Exxon spokesman.

A familiar trend

Government officials often move to the private sector after retirement, and Iraq has attracted its share.

"These kinds of things have been done for years," said Christopher Hill, Ambassador to Iraq from 2009-2010 among other posts in a multi-decade foreign service career. He now does work for the consulting firm Albright Stonebridge Group (co-led by former Secretary of State Madeleine Albright) but said he hasn't consulted for any energy company or in a country in which he was once posted.

America's second biggest oil company, Chevron, has sought more diplomatic insight. Last year it hired Chris Bowers, who was the UK's consul general in Erbil until July 2012, as business development advisor for Europe, Eurasia and Middle East exploration and production.

Since 2009, Zalmay Khalizad, the former U.S. Ambassador to Afghanistan, Iraq and the United Nations, has had offices in Baghdad and Erbil for business matchmaking and other consulting services, including to energy companies. He declined to name his energy clients in a 2010 interview with Iraq Oil Report, but he has confirmed that he focuses on natural resources in both of the companies he runs: the advisory firm Khalilzad Associates and the investment firm Gryphon Capital Partners.

In the late 1990s, after working in the Reagan and Bush administrations, Khalilzad was also a consultant for a project by Unocal, which was later bought by Chevron, for a failed gas pipeline from Turkmenistan to Pakistan via Afghanistan.

"Some of these people have relations with Iraqi politicians that may be on a deeper level than what an oil company can achieve in the commercial sector, and this is what they find is interesting," said Hill. "They all knew the various leaderships, including Maliki and others. Getting people to the point where they can reach a deal involves more than just a transaction; it involves relationships."

Other powerful former U.S. officials have also parleyed their government experience into the business sector, though not as consultants. Jay Garner, who oversaw the first months of the U.S. occupation in Iraq, has served on the board of Vast Exploration, an oil company that until recently operated in the KRG; and Peter Galbraith, the U.S. Ambassador to Croatia from 1993-1998, advised the Kurds in drafting Iraq's 2005 Constitution and middle-manned Norwegian firm DNO's first deals with the KRG.

Changes at Exxon

Among the slate of Exxon's big names, Jeffrey's may be the most consequential: the man who most vividly saw the drawbacks of the company's tack toward the KRG is now advising it about how to navigate Iraq's ongoing political storms.

Exxon CEO Rex Tillerson recently made a high-profile visit to Baghdad, engaging in direct talks with Maliki. Given that Exxon had been seeking potential buyers to take over its contract with Baghdad, for the super-giant West Qurna 1 field in Basra, Tillerson's visit seemed to signal a shift toward re-engagement.

These developments also coincide with Jeffrey's consulting.

"It's a good thing," said a U.S. official who has worked with Jeffrey. "The way (Exxon) went into the KRG, they didn't get good advice about the Iraqi political scene."

U.S. officials said that Jeffrey is complying with American law and company policy, and will not discuss Iraq or Exxon with former colleagues still in the government.

Jeffrey is now a visiting fellow at the Washington Institute think tank, following his retirement from 35 years in the foreign service, during which he served as ambassador to Turkey from 2008-2010 and Deputy National Security Advisor from 2007-2008, among other top posts. He was deputy chief of mission and then charge d'affaires in Iraq from 2004-2006, and special advisor for Iraq to Secretary of State Condoleezza Rice from 2006-2007.

He was ambassador to Iraq from Aug. 5, 2010 to the summer of 2012, at a critical time for the country and its oil sector. During his tenure, on Oct. 18, 2011, Exxon signed its KRG contracts – just two months before all formal U.S. military forces would leave the country. At the same time, Prime Minister Nouri al-Maliki's coalition government was beginning to show signs of fracturing.

The Exxon deal didn't help. Baghdad and the KRG were locked in a dispute over oil rights, and Exxon's move implicitly endorsed the Kurdish stance. Three contracts were particularly controversial, since they required the American super-major to drill for oil in territory claimed by various ethnic groups who are all pushing to draw Iraq's internal boundaries differently.

U.S. policy had been to discourage such deals. Jeffrey "was among the most vocal against Exxon's work," said one of the sources close to Exxon's consulting world. "He was known to be not at all pleased with the pivot north. He was known to have very sternly delivered some unpleasant messages to the KRG."

The deals were vexing for several reasons. Initially, they threatened Washington's relationship with Baghdad: officials in Baghdad suspected Exxon's move reflected a switch in U.S. policy toward the Kurdish oil sector, and Jeffrey had to convince the skeptical Iraqis that his government had actually been defied by the largest American oil company.

That argument also carried a price, as Exxon's defiant move decreased the Embassy's clout. American troops were already withdrawing from the country, reducing diplomatic leverage; now, U.S. diplomats found their influence entirely decoupled from that of their country's flagship oil company.

Since then, ExxonMobil, which has tried to maintain a low-key public profile in Iraq, has made good on contractual commitments in both the north and in its West Qurna 1 project, a development deal it signed in January 2010.

But the deal it struck with the Kurds was one brimming with political backlash: Exxon has been told numerous times by Prime Minister Nouri al-Maliki, Deputy Prime Minister Hussain al-Shahristani, and Oil Minister Abdul Karim Luaibi, that it must either withdraw from its KRG contracts or sell its West Qurna assets.

Late last year, as Exxon was preparing plans to drill, top allies of Maliki went public to say that drilling in disputed territories could bring Iraqi tanks to their oil tracts.

Last month, Exxon CEO Rex Tillerson visited Maliki in Baghdad, and then met with KRG President Massoud Barzani in Davos, Switzerland. The leader of the company, who has spoken only a few public sentences about Iraq in the past year and a half, has now taken center stage in the country's oil politics.

In both meetings, Tillerson had only one other person with him: Gamal Helal, an influential Egyptian-American diplomat, translator and advisor to Presidents Clinton, Bush and Obama and other American policymakers, who retired in 2009 to start his own consultancy.

Ben Lando reported from Washington, DC and Baghdad. Ben Van Heuvelen contributed from New York.