Posted by: bmeverett | July 10, 2012

“Private Empire” by Steve Coll

Steve Coll, an award-winning journalist and current President of the New American Foundation, has written a fascinating new book on the oil industry entitled “Private Empire: ExxonMobil and American Power.” This book is full of superb narrative and useful information, but, at its core, it’s unfocused and confused. Corporate Social Responsibility (CSR), the theme of Mr. Coll’s book, has become a critical issue in today’s globalized world, but the term still has no real definition. What do we really expect of large multinational companies in today’s globalized world? Does ExxonMobil have significant political power which it uses to enrich itself at society’s expense? Does ExxonMobil have significant political power which it fails to use to benefit society? The title of Mr. Coll’s book suggests that he believes the first but in fact he never seems to come to a landing on this issue. I plan to make several posts on this book, and I’ll start with the story of Aceh Province in Indonesia.

During the 1970s, Mobil Oil acquired an interest in a large liquefied natural gas (LNG) project in the Indonesian province of Aceh. Aceh Province has been troubled by separatist violence since Indonesia’s founding as an independent country in the 1940s. Separatist movements are unfortunately common in many countries whose borders were established by colonial powers rather than by local cultures, traditions and loyalties. Given, however, that countries like Indonesia are recognized by the United Nations and other governments within their current borders, how should a multinational company respond to separatists and to government attempts to defeat them?

Mr. Coll’s narrative portrays ExxonMobil as acting carefully and cautiously. ExxonMobil has never taken a position on Acehnese independence, nor should it. Many Scots want independence, which would bring much of the North Sea oil and gas into their territory. It would be wrong, as well as politically stupid, for any oil company operating in the North Sea to either support or oppose Scottish independence. That’s clearly a matter for the UK’s political institutions not commercial, particularly foreign, entities to solve. ExxonMobil never gave in to the extortion demands of the Acehnese separatists, which would have financed their subversive activities. The Company focused instead on the safety and security of its employees and consulted closely with the Indonesian Government and the US Embassy regarding the status of its operations. When the local security situation was too dangerous, the Company shut down operations. When the area was secured, operations resumed. ExxonMobil never participated in security operations. It never attempted to tell either the Indonesian Government or the Acehnese separatists how they should deal with this quintessentially political problem. In fact, the company pretty much stayed out of the dispute.

So what exactly did ExxonMobil do wrong in Aceh? Human rights organizations make two accusations. First, ExxonMobil paid the salaries of some Indonesian military personnel in Aceh, and the Indonesian military has been accused of torture and murder. According to Mr. Coll’s narrative, however, the payment of military salaries was part of ExxonMobil’s contract with the Indonesian government. Nobody has alleged that ExxonMobil had any authority over the troops it financed or any knowledge of atrocities they committed. In this sense, all ExxonMobil did was pay their lawfully required taxes. Human rights abuses occur all over the world, but the responsibility lies with the people who order these actions, not the taxpayers who unknowingly pay for them.

Second, some human rights groups accuse the Indonesian military of using ExxonMobil equipment and facilities to torture separatists and bury the bodies of murdered civilians. Again, however, there has been no allegation that ExxonMobil knew about these abuses or participated in them in any way. The Company states that the military sometimes asked for the use of equipment for road-building and that these requests were granted. Human rights groups often accuse private companies of complicity not because the companies were involved in abuses, but because the governments who actually were responsible enjoy sovereign immunity and cannot be sued. Companies, on the other hand, are easy targets and subject to legal and public pressure.

Mr. Coll relates this story clearly and in detail, yet still comes out as highly critical of ExxonMobil. He really veers off into the weeds with his discussion of ExxonMobil’s refusal to sign onto various voluntary corporate codes. For example, in 2001, the Clinton and Blair Administrations co-sponsored the Voluntary Principles on Security and Human Rights. These principles required companies, among other things, to “use their influence” to “promote the principle that force should be used only when strictly necessary and to an extent proportional to the threat.” Signing on to these principles would obligate ExxonMobil to behave not as a commercial entity but as a party to a complex political and military dispute. Is that really what we want companies to do? How would Americans feel if British Petroleum stated publicly that it disapproved of the detention of terrorist suspects in Guantanamo and pledged to use its influence to pressure Washington to close Guantanamo? Some human rights groups would undoubtedly be delighted, but it’s my guess that most Americans would be outraged and create a backlash that would jeopardize BP’s ability to conduct business in the US.

Despite the plethora of separatist movements around the globe, we still live in a world of nation states, and there is a strong consensus in the world today that trade and investment are generally positive activities, even when political tensions and differences persist. Occasionally, a country’s behavior is so dangerous or disruptive that trade and investment are curtailed. That decision, however, is one for governments to make, not private companies. The US Government has severe sanctions on countries like Iran, North Korea and Cuba. ExxonMobil respects those political decisions and abides by the law. Where the US government has not imposed sanctions, however, companies should feel free to engage in normal commerce. The positive results of commerce include local employment, tax revenue to the host government, economic stimulation through the purchase of local goods and services, support for the rule of law and honest business practices. Clearly, companies should not participate in human rights abuses and need to be smart and sensitive in this area. We should not, however, expect them to “use their influence” in support of American foreign policy objectives or to serve as a branch office of Amnesty International.


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