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The Wall Street Journal: Totaled

EXTRACT: It hasn’t stopped Russia from targeting its Khariaga project with the same sort of “environmental” complaints that saw Shell driven out of the country last week.


December 27, 2006; Page A9

The coming year is likely to be a case of good news/bad news for one of the world’s prominent oil executives. Christophe de Margerie is slated to become the new chief executive of France’s Total SA, the world’s sixth-largest oil company, succeeding the steely Thierry Desmarest (who will remain as chairman). In the coming year, Mr. de Margerie is also likely to learn his fate under a French criminal investigation into oil-related bribery in Iraq, Iran and Russia that saw him detained and questioned for 48 hours in October.

Different readers will have their own ideas about which development is the good news, which the bad. Total itself was not happy with a column here almost four years ago suggesting that the then-pending Iraq war was a war for oil — France’s oil.

Since then, however, debriefing of Saddam and his aides has made clear just how strongly the Iraqi regime had relied on oil deals dangled in front of French influentials and others to help secure the necessary U.N. Security Council votes to let Saddam wriggle free of sanctions, avoid U.S. military action and resume his pursuit of nuclear weapons in competition with his historic rival, Iran. This was the burden of the CIA’s Duelfer report; powerful corroborating evidence was also supplied by the Volcker report on the U.N. Oil for Food scandal.

As far back as 1994, a Boston Globe editorial complained of Total and another French company with which it later merged: “The French oil companies Elf Aquitaine and CFP-Total have acknowledged more than 40 meetings with Saddam’s accomplices since the end of the last Gulf war. Last June Iraqi oil officials went to Paris to sign an agreement for the rebuilding of Iraq’s Nahr Umar oil field . . . For 10 days last April, Saddam conducted a murderous offensive against the population of southern Iraq. Specialists suspect Saddam’s cleansing of the Shia Muslims who live in the southern no-fly zone established by the coalition allies was a butchery performed to make the region safe for the French oil companies.”

The Globe editorial was occasioned by President Clinton’s decision to redeploy combat troops to Kuwait as Saddam again brandished an invasion force on the border. Many forget about all this, imagining U.S. involvement in Iraq began in 2003. Total says today that it never signed any contracts with Saddam, which would have been a violation of U.N. sanctions. Therefore, Total is clean. Of course, the company also says that the 10 years of work it did with Saddam’s regime should put it in the best position today to develop Iraq’s massive fields when a new government is ready.

Mr. de Margerie, for what it’s worth, has a walrus mustache and a reputation as a genial, even fun-loving, oilman. He didn’t graduate from any French école; though a scion of the Taittinger champagne family, he made his mark in the trenches, leading the company’s dealings in the Middle East. His legal problems today arise as a direct consequence of Total’s strategy for differentiating itself from other oil companies in how it deals with oil-producing states.

Total prides itself on being a non-“Anglo-Saxon” partner in developing resources increasingly under the control of authoritarian or populist leaders around the world. Mr. de Margerie has gleefully acknowledged that Total overruled its own lawyers in negotiating with Saddam. He tweaks rival BP over its slogan “beyond petroleum,” saying Total is “beyond old petroleum practices,” i.e., willing to partner on less-advantageous terms with government-run oil companies and step away from its core competencies to help out with education, electrification, whatever host countries want.

You can’t argue with financial success. Under Messrs. Desmarest and de Margerie, Total has grown from also-ran to global player. This year, it will likely report more than $12 billion in profit. On the other hand, its strategy of being an understanding friend to radical regimes didn’t stop Venezuela’s Hugh Chávez from confiscating its Jusepin oil field or unilaterally rewriting the terms of its Sincor heavy crude project. It hasn’t stopped Russia from targeting its Khariaga project with the same sort of “environmental” complaints that saw Shell driven out of the country last week.

If the reported suspicions of investigating magistrate Philippe Courroye are correct, Total’s strategy may also have involved a certain amount of bribery of local officials and perhaps kickbacks to French politicians, for which the company may yet face painful accounting. Indeed, Total may have been guilty of a serious miscalculation in supposing that being French somehow gave it extra leeway in negotiating the increasingly stringent norms of global corporate behavior.

The bribery indications first emerged, after all, as the result of a Swiss money laundering investigation, under laws the world had demanded of the Swiss to curb the nefarious uses of Swiss banking secrecy. French authorities went along at first and raided Total’s Paris headquarters, but later reportedly sealed the evidence citing French “national interest.”

French “national interest,” however, didn’t stop the trial and conviction in 2003 of a former Elf chairman and dozens of associates over a bribery, kickback and embezzlement scheme blessed by French leaders from Charles de Gaulle to Francois Mitterrand. Nor is French “national interest” likely to thwart Mr. Courroye’s current inquest, which has attracted too much publicity and exposed the open secret of the corruption of the French governing elite.

Mr. de Margerie is certainly right that the world faces a challenge now that state oil companies run by regimes not known for their efficiency or honesty are increasingly monopolizing the world’s oil resources. Evidence is also mounting that Total’s solution is no solution at all.
Holman W. Jenkins Jr. is a member of the editorial board of The Wall Street Journal and writes editorials and the weekly Business World column. Mr. Jenkins joined the Journal in May 1992 as a writer for the editorial page in New York. In February 1994, he moved to Hong Kong as editor of The Asian Wall Street Journal’s editorial page. He returned to the domestic Journal in December 1995 as a member of the paper’s editorial board and was based in San Francisco. In April 1997, he returned to the Journal’s New York office. Mr. Jenkins won a 1997 Gerald Loeb Award for distinguished business and financial coverage. Born in Philadelphia, Mr. Jenkins received a bachelor’s degree from Hobart and William Smith Colleges in Geneva, N.Y. He received a master’s degree in journalism from Northwestern University in Evanston, Ill., and studied at the University of Michigan on a journalism fellowship.
Mr. Jenkins invites comments to
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