Why Rex Tillerson is good news for the Gulf

US President-elect Trump has sidestepped the accepted political norm with his appointment for the secretary of state

Dr. Mohamed A. Ramady
Dr. Mohamed A. Ramady - Special to Al Arabiya English
Published: Updated:
Read Mode
100% Font Size
5 min read

US President-elect Trump has once again sidestepped the accepted political norm by appointing a non-traditional candidate to head the US State Department, arguably one of the key US Administration positions with influence over international policy. In the current climate of geo-political tensions and considering the importance of oil in global energy relations, the appointment of ExxonMobil CEO Rex Tillerson as secretary of state brings some glimmer of hope that deals can be made which could benefit Gulf countries and others. The high stakes interplay of the three-way global energy politics between Saudi Arabia, Russia and the United States will entail an additional new wrinkle with Rex (king in Latin) Tillerson as secretary of state. Tillerson has a deep “big oil” background, mostly on the international energy side, and he knows Russia, Saudi Arabia and the Gulf countries extremely well. He may quickly find international oil politics will demand a bulk of his time next year and President-elect Trump has not hidden his preference for appointees who can manage deals rather than abstract international relations on the premise that beneficial trade deals for both parties will link nations more solidly.

The US is now more or less an equally powerful swing producer through its shale production. That is a key driver to the $60 upper price band, which the Saudis and the other oil producers are betting will limit the pace and scale of another US shale production surge. It is, however, a bet that will likely be sorely tested by the middle of next year if President-elect Trump follows up on his election promise to unshackle US domestic energy production and hasten the US’ energy independence, primarily from the Middle East.

This might fly in the face of Tillerson’s natural inclination and business background given the mega deals ExxonMobil has carried out both in Russia and the Gulf but he could direct US-Russia-Gulf energy relations in a broader trade relationship built on expanding the current joint US foreign investments in the downstream refining sector either abroad or in the US which would appeal to a President Trump who has promised to bring back jobs to the US. Tillerson has worked with Putin whom he first met in 1999 when the pair met on the remote Sakhalin Island in Russia’s Far East. That connection could make him a useful bridge between the Russian leader and Trump, who has repeatedly said he’d seek a more cooperative relationship with Moscow. Under Tillerson’s leadership, Russia became ExxonMobil’s single biggest exploration theater as the company amassed drilling rights across tens of millions of acres. When President Putin forced Royal Dutch Shell Plc and other foreign investors to cede control of a massive gas export project on Sakhalin Island in 2007, ExxonMobil’s holdings in the same region remained intact. Tillerson steered ExxonMobil’s historic 2011 deal with Rosneft that gave the US driller access to Russia’s vast Arctic deep-water and shale oil deposits with the discovery of a billion-barrel crude field in the Kara Sea. The news that Qatar has acquired a stake in Rosneft cements this triangular US–Russian–Gulf energy relationship.

In the Gulf, ExxonMobil can draw upon a host of joint venture relationships spanning eight decades, such as Saudi Aramco’s joint venture SAMREF (Saudi Aramco Mobil Refinery) and SABIC’s joint ventures such as YANPET (Saudi Yanbu Petrochemicals Company), KEMYA (Jubal Petrochemical Company) and with SABIC and ExxonMobil considering developing joint petrochemical complexes on the US Gulf Coast in Texas or Louisiana. Other ExxonMobil investments in the GCC are Abu Dhabi’s ZADCO Upper Zakum oilfield development and in MELUBECO, the Middle East Lubricant Company with GIBCA, BP and EMERAT. Exxon Mobil’s relationship with Qatar is even more extensive, dating back to 1935 and more recently through joint ventures with RasGas and QatarGas to develop the world’s largest non-associated gas fields in Qatar. With the opening up of the Iraqi energy sector to foreign companies, ExxonMobil now has a presence in that country through two affiliated companies – ExxonMobil Iraq Ltd and ExxonMobil Kurdistan Region of Iraq Ltd, which could be models of future trade cooperation between former adversaries such as the US and Iraq and something dear to Trump’s message of establishing trade deals with nations.

Despite some pessimism in the Gulf over a Trump presidency, the appointment of Rex Tillerson shows pragmatism that is far removed from his isolationist electioneering sound bites and rhetoric. If the new US secretary of state follows up on his considerable business acumen, then some of the pessimism surrounding Trump could be misplaced.

Dr. Mohamed Ramady is an energy economist and geo political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia.

Top Content Trending