Magazine

The Oil Rush to the Caspian Sea


The Oil and the Glory

The Pursuit of Empire and

Fortune on the Caspian Sea

By Steve LeVine

Random House; $27.95

(Readers'

Reviews below)

Editor's Review

The Good A fascinating look at the players and intrigue behind major Caspian region oil deals.

The Bad Lacks a firm assessment on just how important this area's resources are to the global energy picture

The Bottom Line A very good book that fills gaps in our knowledge about a vital subject.

The disintegration of the Soviet Union in the early 1990s unleashed a modern-day Klondike in the bleak but oil-soaked region around the Caspian Sea. Stories of how companies such as Chevron (CVX) and ExxonMobil (XOM) gained access to the huge oil fields of Kazakhstan and Azerbaijan have leaked out in dribs and drabs, but now Steve LeVine has gathered the whole Wild East tale in one canny and entertaining book, The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea.

LeVine, who spent many years in Russia and its neighbors as a correspondent for The Wall Street Journal and other publications, has filled his volume with intriguing, sometimes daunting characters. Ludvig Nobel, a 19th century entrepreneur and member of the famed Swedish family, organized the Caspian oil trade much as John D. Rockefeller did the U.S. business. Zeynalabdin Tagiyev, an Azeri oil baron of the 1880s, once ordered servants to castrate a rival for his wife's affections. Marat Manafov, Azerbaijan's oil negotiator during the 1990s, shook up meetings by pointing a pistol at Western oil executives.

More important, the book zooms in on the dubious practices, intrigue, and political arm-twisting that can be a key part of deals in developing nations, where ever more of the oil business takes place. In Kazakhstan in the 1990s, large sums from oil companies allegedly ended up in the Swiss bank accounts of the country's President. At the same time, in Azerbaijan, a $230 million "signing bonus" paid by a consortium of Western companies was almost instantly dispersed "to offshore accounts in countries with lax banking laws," according to a Pennzoil official quoted by LeVine.

LeVine also underscores the intensely political nature of oil. Both Russia and the U.S. employed government muscle to influence which companies gained access to Caspian countries' reserves and the routes through which it would be exported. Al Gore tried to use his Vice-Presidential clout in Chevron's favor against the maverick Dutch oil trader John Deuss. Deuss, playing a clever but ultimately losing game, was trying to parlay the backing of the Sultan of Oman into a lock on the vital pipeline route out of Kazakhstan.

Much less interesting than such characters, in LeVine's telling, are the oil company executives, who are burdened both by a sense of entitlement and a tin ear for local politics. BP's (BP) John Browne, then head of the company's exploration and production, did impress his Kazakh hosts by gulping down a local delicacy—a sheep's eye. But, says LeVine, Chevron CEO Kenneth Derr "literally turned his back" on Kazakhstan President Nursultan Nazarbayev when he asked for help in building a soccer stadium for his new capital, Astana. Nazarbayev, whose oil Derr coveted, "was suitably flabbergasted and insulted."

A key figure in much of the Caspian intrigue was one James H. Giffen, the son of a Stockton (Calif.) haberdasher who became a player in the hard-to-penetrate world of U.S.-Soviet trade. In the mid-1980s, Giffen convinced Soviet leader Mikhail Gorbachev that U.S. business could help cure his country's ailing economy. The apex of Giffen's career: the deal he brokered giving Chevron exclusive rights to Kazakhstan's Tengiz, a gem of an oil field that is probably among the world's 10 largest. In return, says LeVine, Giffen got 7.5 cents on each barrel Chevron produced, potentially tens of millions of dollars.

For years Giffen, a frequent source for BusinessWeek reporters, masterfully juggled different interests, including the Kazakhs, the oil companies, and the CIA. He and Nazarbayev "sometimes retreated into the countryside for days at a time, accompanied by young Kazakh women and well supplied with whiskey." But his influence waned, and in 2003 he was arrested at New York's John F. Kennedy International Airport on charges of funneling $77 million in bribes from U.S. oil companies to Nazarbayev and other Kazakh insiders.

He still awaits trial, insisting that he had been, in LeVine's words, "a U.S. agent in Kazakhstan...in one of the most strategic regions in the world." Whatever happens to him, the spot is sure to spawn other outrageous characters to take his place.

By Stanley Reed


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