ExxonMobil Chairman and CEO chosen to be the United States’ most powerful diplomat, 4th in line to succeed the president
President-elect Donald Trump announced Tuesday that his pick for secretary of state will be ExxonMobil Corp. (ticker: XOM) Chairman and CEO Rex Tillerson.
“His tenacity, broad experience and deep understanding of geopolitics make him an excellent choice for Secretary of State,” Trump said in a statement. “He will promote regional stability and focus on the core national security interests of the United States. Rex knows how to manage a global enterprise, which is crucial to running a successful State Department, and his relationships with leaders all over the world are second to none.”
Tillerson has worked for Exxon since 1975 when he began his career as a production engineer, and has held several internationally-focused positions in his time with the company including president of Exxon Yemen, vice president of Exxon Ventures (Commonwealth of Independent States), and president of Exxon’s Russian subsidiary, Exxon Neftegas Limited. His history working with Russia, and his reportedly close ties to Russian President Vladimir Putin, indicate that Tillerson may represent another voice in Trump’s administration that looks to take a softer line with Russia.
ExxonMobil under Tillerson
Having final oversight of operations in over 50 countries, it is fair to say that Tillerson knows how to manage widespread global interests. In his more than 40 years of working at Exxon, Tillerson has worked his way up from a production engineer all the way to chairman and chief executive officer of the largest oil and gas company in the United States, and the third largest publicly traded energy company in the world, according to Forbes’ 2016 rankings, as measured by production.
That puts ExxonMobil third in production behind Russia’s state-owned giants Gazprom and Rosneft, and when you compare Forbes’ oil and gas companies by enterprise value, ExxonMobil came in second, slightly behind China’s CNOOC and significantly ahead of PetroChina.
In its third-quarter 2016 financial results, Exxon reported earnings of $2.7 billion, or $0.63 per share. Cash flow from operations and asset sales were $6.3 billion, while capital expenditures totaled $4.2 billion, down 45% from Q3’15, according to the company’s financial reports.
Under Tillerson’s leadership, Exxon has increased reserves from less than 11,000 MMBOE in Q4 2006 to more than 15,300 MMBOE in Q3 2016 despite the low price of oil forcing Exxon and others to write down more expensive operations including its Kearl oil sands operations north of Fort McMurray, Alberta.
Exxon’s total debt under Rex Tillerson’s tenure has increased from less than $10 billion in 2007 to more than $45 billion in Q3 2016.
Source: Google Finance. XOM stock price since 1978, shortly after Tillerson joined the company.
Putin
Tillerson’s ties to Putin and other Russian officials has set some politicians and media outlets on edge, and will likely lead to a battle during Tillerson’s Senate confirmation hearing. Senators John McCain and Lindsey Graham have already voiced concerns about the pick, and what it could mean for U.S.-Russian relations.
“Vladimir Putin is a thug, bully and a murderer, and anybody else who describes him as anything else is lying,” McCain said on Fox News. Tillerson’s connections with the Russian president were “a matter of concern” McCain added.
Other members of the Republican Party, including Marco Rubio, who sits on the Senate Foreign Relations Committee, which will hold Tillerson’s confirmation hearings, have said the executive’s ties to the Russian government could be an issue. It would take only one Republican on the committee joining all the committee’s Democrats to block Tillerson’s nomination in the committee. The nomination could then be taken to the Senate floor despite a rejection in the committee, but that would be an unprecedented move for a Cabinet post.
Despite the criticism of Tillerson’s connections to Russia, several prominent members of the Republican foreign policy establishment have come out in favor of Exxon’s CEO. Ex-Defense Secretary and CIA Director Robert Gates and President George W. Bush’s former secretary of state Condoleezza Rice have both come out in favor of Tillerson. It is worth mentioning that Exxon is a client of Rice Hadley Gates LLC, the Washington, D.C.-Silicon Valley consultancy in which Gates and Rice are principals.
The U.S. Office of Government Ethics says executive branch employees need to avoid financial conflicts of interest and may be required to sell or place in a trust any assets, such as stock, if a waiver or recusal are not reasonable options. Tillerson will hit Exxon’s mandatory retirement age of 65 in March.
Exxon’s corporate website posted the following message on its home page:
“The board of directors of Exxon Mobil Corporation congratulates Rex W. Tillerson, chairman and chief executive officer, on his nomination for the position of U.S. secretary of state. The board will be meeting shortly regarding transition.”
Clinton’s “economic statecraft” could thrive under Tillerson
In a twist of fate, Tillerson’s election to secretary of state could mean a continuation of policies set under Trump’s political rival Hillary Clinton and former secretary of state under President Obama. Tillerson would likely extend a trend of the U.S. pursuing “economic statecraft,” said former Director of International Economic Affairs on Obama’s National Security Council David Mortlock.
“It ironically continues something that really started in the Clinton State Department which is economic statecraft and the fact that U.S. CEOs, U.S. companies have been some of our best diplomats overseas and the U.S. brand is an important part of U.S. diplomacy and U.S. representation,” Mortlock told Bloomberg.
