his insecurity, envy and resentment. His grievances were echoed by the ‘Grey Cardinals’, his xenophobic ex-KGB cronies. Like their predecessors employed by Yeltsin, they lusted for personal wealth. Allowing ExxonMobil to move further into Russia threatened their ambitions, which were already limited by BP’s deal. By September, Putin was becoming convinced that Khodorkovsky had planned for two years to fund his takeover of Russia by selling Yukos. The president feared that Khodorkovsky could even buy the prosecutor general, or at least organise his dismissal. The resurgence of Putin’s national conscience had been anticipated by a handful of realists in Yukos’s hierarchy: ‘It’s all crazy to think Putin will allow a crown jewel to be sold to foreigners to benefit a group of Jewish bandits.’ But Khodorkovsky, they agreed, was ‘running high’. The turbulence influenced Khodorkovsky’s negotiations with Raymond.
Khodorkovsky arrived at the Kempinsky with his trusted translator Peter Laing. Over two hours he argued with Raymond about the $5 billion. Reams of paper were covered with figures as the translators interpreted the sums. ‘Ego’, one of the translators would say, was preventing the two men splitting the difference. ‘They’re chiselling,’ he concluded. Unwilling to concede, Raymond stormed out of the room and slammed the door of his bedroom without saying goodnight. In hindsight, he would conclude that Khodorkovsky was double-dealing, dangling an alternative deal to Chevron. ‘The meeting did not go well,’ Khodorkovsky told his staff after returning from the hotel. ‘We won’t be able to do the deal with Exxon the way they want, but let’s keep them involved to keep the pressure on Chevron.’ By then, Khodorkovsky’s fate had been sealed.
In that familiar territory, few were surprised by the news on Saturday, 25 October. Late that night Mikhail Khodorkovsky’s private plane was ‘delayed’ on the tarmac in Novosibirsk, Siberia. Suddenly, a group of masked security officers burst into the plane, shouting ‘Weapons on the floor or we’ll shoot!’ Khodorkovsky was arrested on charges of fraud and tax evasion. His arrest prompted his close associates to flee to Israel and the USA. ‘This is the signal that politics has trumped even the appearance of rule of law,’ said Robert Amsterdam, Khodorkovsky’s American lawyer. But Khodorkovsky’s arrest was popular in Russia, except among the other oligarchs, many of whom fled overseas in their private jets to watch events unfold in safety. Mikhail Fridman arrived in Mexico that night on a private jet, for a planned holiday with friends.
Rex Tillerson shed no tears. He shared Khodorkovsky’s contempt for the swamp of corruption among ministers with no interest in the country; but he also had no sympathy for the oligarchs. Raymond was upset that his conversation with Putin in New York may have caused Khodorkovsky’s arrest, not least because the Kremlin began pursuing Russians employed by Yukos, causing several to flee to the West. But he expressed no concern that the meeting had contributed to triggering the oil industry’s renationalisation, changing the atmosphere for Western business in Russia. ‘If they don’t understand, then they’ll have to learn,’ Raymond told an aide. ‘We won’t be a junior partner in Russia. We’ll only invest when the terms are right.’
In December, Tillerson acknowledged the deal was dead. Yukos was under investigation for tax evasion and Khodorkovsky was charged with serious offences. ‘Russia is closed,’ announced an Exxon executive. ‘It’s impossible to put the genie back in the bottle.’ Western shareholders were about to lose billions of dollars. Putin had done more than terminate a deal; he had curtailed the immediate modernisation of Russia’s oil industry with Western technology and the chance to balance OPEC’s power. Ten years after President Clinton exploited America’s Cold War victory to prise the oil reserves around the Caspian Sea from Russian influence, Putin had begun to reverse the humiliation. Russia’s prestige and power, he decided, depended upon high energy prices or, more potently, refusing to commit his government to satisfying all Europe’s energy requirements. Security of supply rather than the price of Russia’s oil and gas would determine the fate of the world’s economy. Satisfying the increasing global demand for oil partly depended on increasing Russia’s oil production from 10 million barrels a day to 12 million. That increase hinged on Khodorkovsky’s modernisation of Yukos. After Khodorkovsky’s arrest, Yukos’s self-improvement programme gradually withered, Russia’s oil production slipped and China’s growing demand could not be satisfied. Unforeseen, the débâcle contributed to the oil crisis in 2008 and the global recession.
By then Raymond had retired with a record $398 million payoff and pension. Looking back on his Russian experience, he could draw on the Exxon homily that there was nothing new in oil – only the players in each country were different. In the balance of risk, he had won some and lost some, but the cycle had never changed. Exxon was in better shape than it had been when he had taken over. In his Exxoncentric manner he ignored the problems he had created. The mergers and consolidation among the oil majors orchestrated by himself and John Browne had created a new arrogance and blindness towards the oil-producing countries, alienating their governments from granting the oil majors access to their reserves. Putin’s reaction against Exxon was echoed by governments across the globe. In unison, they regarded Exxon, BP and Shell as selfishly unwilling to share their profits. More pertinently, Raymond and Browne, while worshipping the cycle, had misjudged their scripture.
Both had inherited similar lessons about limiting risk. Their forefathers, they had been taught, had been scorched during the 1960s by investing too much. By the late 1970s the industry was hampered by bottlenecks. Mastering the cycle, Raymond and Browne knew, was perilous, just as predicting oil prices was impossible. Their predecessors had failed to foresee the collapse of oil prices in 1986, 1993 and 1998, and none had anticipated the huge increases after 1973. Learning the lessons had proved difficult. In 2003, Raymond and Browne did not anticipate that the cycle had again turned and prices would rise. More eager to instantly satisfy their shareholders than to care for the long-term security of oil supplies for Europe and the United States, both were buying back shares rather than investing in new oilfields. They would blame oil nationalism for preventing efficient exploration and production, but Raymond’s insensitivity towards Putin justified the president’s suspicion.
Gathering the masters of the underworld at BP’s concrete campus in Houston’s sprawling suburbs in early 2009 was a cruel ritual. The muted light cast a harsh sheen across the weary faces of 12 men and one woman in the ‘Big Brain Room’, a small cinema formally known as the HIVE, the Highly Immersive Visualization Environment. In the centre of the front row sat David Rainey, BP’s head of exploration. Peering at the curved screen through battery-powered spectacles allowing ‘sight’ of the whole reservoir, the audience scrutinised the computer-generated three-dimensional images of a possible oil reservoir four miles below the waves of the Gulf of Mexico. Hand-picked to assess the risks, none of the 13 was a buccaneer; they were rather proven company loyalists temporarily united by one credo: if their $100-million gamble to discover whether oil existed deep in the unknown was successful, BP could pocket $50 billion over ten years. But they would be cursed, not least by themselves, if their calculations were wrong. For oil explorers, the licence to make mistakes was limited. The humiliation of failure was permanent.
The mood in the HIVE was inevitably influenced by BP’s decision to locate its headquarters within a modern concrete zone. Despite some scattered trees, the disfigured Texan landscape embodied the cliché that oil is either an old, difficult and dirty business or ‘new, good stuff’.
‘Nothing is more exciting than drilling,’ smiled Rainey. The Ulsterman, born in 1954, personified the oil man’s permanent restlessness. Easy oil – ‘the low-hanging fruit’ – was now history, and breaking frontiers to find new oil was ‘incredibly difficult’. Although BP’s skills in exploration were acknowledged by its rivals, the search beneath the Gulf of Mexico was particularly brutal. Excluded from most playgrounds, at best only one in three of BP’s operations would strike oil.
At the end of the show the 13 headed for a hotel conference room, each clutching a personalised folder listing 50 potential sites for test holes off West Africa’s coast, in Asia, South America and the Gulf of Mexico. Over the next four days they would decide where to spend