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Will Rex Tillerson take the business or diplomatic approach to Africa?

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Will Rex Tillerson take the business or diplomatic approach to Africa?

Opinion | Rex Tillerson, now a member of Donald Trump’s powerful cabinet as Secretary of State, will be one of the most influential people determining the shape of the world over the next four years. What will his priorities be in Africa, given the fact that as CEO of ExxonMobil, he was deeply involved in several important deals on the continent? By Otavio Veras.

In the wake of controversial selections for Donald Trump’s cabinet, the spotlight turned to Rex Tillerson, his choice as Secretary of State, the highest diplomatic rank in the US government. Rex Tillerson is an experienced oil and gas industry executive. Having worked at ExxonMobil for 41 years, Tillerson rose to become its chairman and CEO by 2006. Tillerson’s work helped shape what became one of the largest companies in the world.

To reach this size, ExxonMobil businesses expanded to inhospitable places in the search for oil. The company pioneered oil and gas exploration and production in countries with questionable human rights records, creating ties with corrupt governments. Royalties originating from ExxonMobil’s oil and gas production became the main revenue source for some fragile states ruled by dictators.

The power and influence ExxonMobil amassed around the globe during Rex Tillerson’s leadership make him a well-connected ambassador for the US. However, can the business executive suddenly morph into being an impartial diplomat, dealing with scores of live hot spots and needing to find the right balance?

How much will his previous incarnation as ExxonMobil’s CEO influence his future conduct in Africa? Here is a brief recap.

 

Chad

ExxonMobil has been involved in questionable businesses in two Sub-Saharan African nations: Chad and Equatorial Guinea. In 2000, ExxonMobil spearheaded the construction of a $4.2bn, 1,070kmlong pipeline connecting landlocked Chad and its oil exploration facilities to Cameroon’s Atlantic port at Kribi. Chad is a poor and fragile country, governed by the strongman Idriss Déby since 1990.

The project involved other oil and gas operators as investors. The World Bank was also part of the investors’ group and, although it financed only a small portion of the project, it gave a much-sought-after stamp of credibility to a venture that was seen as highly risky by private investors.

Chad committed to spending a large portion of the oil royalties on infrastructure and development programmes. The deal involved the establishment of an oversight council that would assure the royalties were being used responsibly. The oil started flowing in 2003, but two years later, the oversight board found that a portion of the oil revenue was being wasted. Infrastructure projects were paid for, but not always completed, and there were issues such as school and hospital equipment being bought at inflated prices.

Finally, by 2008, after several attempts to fix the situation, the World Bank quietly pulled out of the deal. Chad, with its bank accounts inflated with billions of dollars from royalties paid by ExxonMobil, easily repaid its $65.7m loan to the World Bank ahead of schedule, and was free to do whatever it wanted with the earnings coming from oil production.

By the time Chad withdrew from the deal with the World Bank, the US embassy there was delivering total aid of no more than $10m per year. The royalties from oil tax that ExxonMobil was paying Idriss Déby’s regime were in excess of $500m a year.

With these figures in mind, it is not difficult to understand which alliance would be more valuable from the Chad government’s point of view. ExxonMobil was more influential in that country than the most powerful nation in the world.

Being CEO of ExxonMobil from 2006 onwards, Rex Tillerson was aware of how Chad was spending the oil royalties. A small and powerful elite was being enriched, while the rest of the population reaped little benefit.

Equatorial Guinea
Equatorial Guinea is another example of ExxonMobil’s involvement in deals with governments that funnelled oil royalties into the pockets of a small and powerful elite. In 2004, a US Senate investigation found that since 1995, a series of payments from American corporations were being made into Equatorial Guinean accounts at the Riggs Bank controlled personally by President Teodoro Obiang and his close associates. ExxonMobil was among the companies involved in the scheme.

The government held about $700m in cash and investment accounts at the Riggs Bank. The US Senate investigation exposed the extent of the connections between ExxonMobil and Obiang.

Obiang and his family used the oil money to buy real estate in Malibu and Paris, as well as life-size statues of Michael Jackson. One of the president’s sons, Teodorin Obiang, is accused of money laundering in France, while the authorities seized 11 luxury cars valued at about $2m and a $180m mansion in Paris.

Although the funnelling of oil money into the Equatorial Guinea’s president’s pockets started before Rex Tillerson’s tenure at ExxonMobil, the practice continued well into his period as CEO of the oil giant.

American policies for Africa – what to expect
Tillerson’s previous dealings with Africa aside, what can one expect from US foreign policy? It is most likely that initiatives started by George Bush and Barack Obama will continue.

However, Obama’s $9.7bn Power Africa programme appears to have stalled. Until July 2015, only $131.5m had been provided. The project is facing delays and, with a Trump administration focused on “America First”, there is a good chance that it may end up getting cancelled altogether. Another policy that may experience some bumps over the next few years is the African Growth and Opportunity Act (AGOA). Oil accounted for 68% of US imports from AGOA beneficiary countries in 2014, while exports were only around 1% of total US imports.

Although President Trump is not allowed to fully cancel this law, he can dictate which countries are eligible to participate in the agreement and, to some extent, which products are included on the trade benefit list. What was planned to become a stepping stone for bilateral trade agreements between the US and Sub-Saharan African countries, may fall short on this objective. The isolationist direction Trump is setting for America will very likely create tougher conditions for the African participants. Trump may try to instate a more balanced agreement, with reduced benefits for the trading partners.

However, the most evident changes in the relationship between African countries and the US are likely to emerge around the democracy and security aspects of US foreign policy. The recent immigration ban on seven Muslim countries – three of them in Africa (Libya, Sudan and Somalia) – is a clear example of this change in focus. The war on terror seems to have gained new and more destructive proportions under the current Trump administration.

It is likely that fewer philanthropic programmes will be started during Trump’s term. The steps Trump took in his first weeks in office show that under his leadership, America is marching towards isolationism, with a really short-term orientation on ramifications that will arise from this new position.

Trump will cut down or try to postpone any welfare programme that does not clearly benefit the US at first, regardless of possible long-term gains for his country.

The ties Tillerson has in Africa, through his previous role as ExxonMobil’s CEO, will always cast doubt on where his true interests lie: his country or the company he helped shape into a global empire? Tillerson is likely to be the least transparent Secretary of State of the modern US era. The track record of dealings between ExxonMobil and corrupt states make a strong case for this assumption.


Explore more of New African’s Trump-Africa coverage here.

Otavio Veras is a Research Associate of the Nanyang Technological University and the Singapore Business Federation Centre for African Studies in Singapore.

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Written by New African Magazine

For over 45 years New African provides unparalleled insights and analysis on African politics and economics, via an African perspective, always. With in-depth monthly reports, New African brings Africa closer to the world and is ideal for those looking to gain a better understanding of the most important issues affecting Africa.

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