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How Hillary Clinton’s State Department Fought For Ghana’s Oil

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In 2009, Kosmos Energy, a small oil exploration company in Texas, wished to cash in on its discovery of an oil field off the coast of Ghana — one of the largest found in West Africa in a decade. The company had an eager buyer in ExxonMobil.

But some in Ghana believed the firm had gotten a sweetheart deal for the drilling rights. So the Ghanaian government decided it wanted to buy the stake itself, for a price the company worried would be far less than ExxonMobil’s offer.

What followed was an international tiff that became one of the first energy challenges for the new US secretary of state, Hillary Clinton.

During her campaign for president in 2008, Hillary Clinton bashed Big Oil and its hefty profits. But in her new position as America’s top diplomat, she found herself in a very different role: defender of those same US oil companies abroad.

Thanks to messages released during the investigation of Clinton’s work email, as well as diplomatic cables published by WikiLeaks, BuzzFeed News has learned how her State Department advocated behind the scenes on behalf of Kosmos and other US oil firms in Ghana. This sort of maneuvering in West Africa and elsewhere followed the lead of previous administrations, and shows an overlooked side of American diplomacy: pushing for US commercial interests in the developing world.

By 2010, for example, Clinton’s State Department was encouraging the governments of Bulgaria, Poland, Romania, and Ukraine to open their doors to US energy giants like Chevron and ExxonMobil to chip away at the long-standing influence of Russia in Eastern Europe. And in Ghana, the arrival of US oil companies in the last decade undercut the growing economic clout of China.

“Helping American businesses interact with foreign governments and advocating for the American economy is an important responsibility of the State Department,” Josh Schwerin, Clinton campaign spokesperson, told BuzzFeed News.

Now on the campaign trail again, Clinton does not tout this work on behalf of US oil companies. Instead, she talks about her role in negotiating the Paris climate agreement, and has called for the US Department of Justice to open an investigation into ExxonMobil for misleading investors about climate change. And she wants the US to reduce oil consumption by one-third.

But executives from ExxonMobil and the Blackstone Group, a Wall Street private-equity firm that backed Kosmos Energy and stood to profit from the sale, have bundled donations and hosted fundraisers for her campaign in 2016.

Through June 2016, Blackstone and its executives also donated tens of thousands of dollars to the Clinton Foundation. (Christine Anderson, a Blackstone spokesperson, noted that the company didn’t begin donating to the Clinton Global Initiative, an arm of the Clinton Foundation, until 2013 — several years after Blackstone had completed its deal with Kosmos.)

Starting in 2009, ExxonMobil began donating to the Clinton Global Initiative. In total, the company gave between $1 million and $5 million to the Clinton Foundation through mid-2016. (There is no evidence the donations influenced the State Department’s decisions. “Hillary Clinton never took action as Secretary of State because of donations to the Clinton Foundation,” Schwerin, the Clinton spokesperson, said.)

“We supported the Clinton Global Initiative from 2009 to 2014 to provide greater visibility for issues like improving global public health and women’s economic status,” Alan Jeffers, a spokesperson for ExxonMobil, told BuzzFeed News.

Meanwhile, in Ghana, oil revenues are smaller than first predicted. And critics say the government’s modest cut of that oil money has been mismanaged, leaving regular Ghanaians with few gains.

“Ghanaians thought things would change with the discovery of oil, that their fortunes would be better,” George Agyei, a senior lecturer at Ghana’s University of Mines and Technology who has studied the public’s attitude toward oil there, told BuzzFeed News. “But after several years of oil production in Ghana, we have shattered hopes.”

A rig for oil exploration in Ghana’s Port of Takoradi in 2008. Pius Utomi Ekpei / AFP / Getty Images

Until 2007, no one had managed to find much oil in Ghana.

“Ghana was not on the map. Everybody who had tried had failed,” George Owusu, a businessman who was among the first to secure rights to look for oil off the coast of Ghana, told BuzzFeed News.

But with neighboring Nigeria and Ivory Coast flush with oil, it was long suspected Ghana had reserves. So Owusu and his business partner, Kwame Bawuah-Edusei, formed the EO Group to win a contract with the Ghanaian government to search for oil in the waters that contained what would come to be called the Jubilee oil field.

The duo didn’t have the money, however, to begin the search. So in 2004 they brought in Kosmos Energy, a small Dallas-based oil exploration firm, to probe 370,000 acres of the Atlantic Ocean south of Ghana.

It wasn’t until Kosmos struck its first oil that anyone knew the extent of Ghana’s offshore bounty. By 2009, the World Bank estimated there were 490 million barrels of oil in the Jubilee discovery. The International Monetary Fund predicted that the petroleum discovery, if managed well, would propel the country to middle-income status.

But with the newfound fortune came suspicion.

Politicians and journalists in Ghana, including some political rivals of Ghanaian President John Kufuor, worried that the deal his government struck with EO Group was too favorable to the oil industry, shortchanging the people of Ghana of oil profit. For example, under the terms of the deal, Kosmos could sell its oil stake without having to pay a heavy tax. Bawuah-Edusei had worked in the Kufuor administration, serving as Ghana’s ambassador to the US from 2006 to 2009, leading to speculation that Kufuor gave a favorable contract to his political allies.

In local media and business publications, Kosmos and its defenders countered that the company took on a significant risk no one else was willing to bear, spending hundreds of millions of dollars searching for oil with no guarantee of success.

“You had a small African country with a perceived injustice from a corporate America,” Antony Goldman, an independent energy analyst, told BuzzFeed News. Of the terms of the deal, he added, “Whether they were overly generous, I think that they were.”

To finance and operate the offshore rigs, Kosmos brought together a consortium of other oil companies, aiming to begin pumping by the end of 2010. Its major partners included US-based Anadarko Petroleum and UK-based Tullow Oil. Together, the three companies owned more than 80% of the Jubilee project, leaving Ghana’s state-owned oil company, Ghana National Petroleum Corporation (GNPC), with only about a 14% stake by 2009.

By 2009, Kosmos’s control of the oil field was at risk. Ghana had elected a new president, John Atta Mills, who campaigned on an anti-corruption platform and said during the campaign he was willing to change the contract with Kosmos to better suit Ghana.

The United States had a new leader, too. In July of that year, President Obama went to Ghana for his first official trip to sub-Saharan Africa, a visit that electrified the small nation.

In a speech to the Ghanaian parliament in July 2009, Obama said “oil brings great opportunities” to Ghana. Clinton wrote about this trip in her 2014 memoir, Hard Choices.

“President Obama and I knew that helping Africa tip toward opportunity instead of conflict was not likely to make big headlines back home, but it could yield big benefits for the United States down the road,” she wrote.

“He issued a challenge to Africans and Westerners alike: Africa needs partnership, not patronage.”

Ghana’s President John Atta Mills and Speaker Joyce Bamford Addo listen to US President Barack Obama addressing the Ghanaian Parliament in 2009. Jim Watson / AFP / Getty Images

Behind the scenes, Obama’s secretary of state was already being dragged into the brewing fight between that government and Kosmos.

That spring, during the height of the financial crisis, the company’s two financial backers, the private-equity firms Blackstone and Warburg Pincus, were ready to cash out. Kosmos told Ghana it wanted to begin taking bids for its large stake in the Jubilee field.

The government told the company it would allow a sale only if Ghana was “fully involved” in the process. Behind closed doors, the government of Ghana was more forthcoming, according to a cable signed by Donald Teitelbaum, the US ambassador to Ghana at the time. In an October 2009 meeting, the Mills administration expressed “negative feelings” toward Kosmos and “stated frankly” that the government preferred to buy the 23.5% stake Kosmos had in the oil field for itself, potentially in partnership with China’s state-run oil company, according to the cable.

But Kosmos had already approached potential buyers. ExxonMobil emerged as the frontrunner, eventually offering about $4 billion for the rights to drill.

When the Ghanaian government caught wind of this offer, it said Kosmos shared information about the oil field without the state’s permission.

“Kosmos broke the law,” one government official told Teitelbaum at the October meeting, according to the cable.

Kosmos countered that it had every right to share the data and seek a sale. It sought the State Department’s help, and deployed a lobbyist, K. Riva Levinson, to make its case. During the Bush administration, Levinson had successfully persuaded the State Department to open an embassy in another West African country, Equatorial Guinea, where Kosmos Energy was working, according to The Hill.

Hewing to language provided by Washington, Teitelbaum pushed back by stressing “the impact on possible investors in Ghana” if its government meddled in business dealings.

While US diplomats defended Kosmos, the US Department of Justice was investigating it.

After Anadarko reported Kosmos Energy and EO Group in January 2009 for possible corruption over how the contract was secured, the agency opened a corruption probe into the two partner companies.

Ghana’s attorney general opened a similar investigation into the development of Jubilee, and a few months later, Ghana froze Kosmos’s bank accounts in the country. After reading a Nov. 16, 2009, news report that the freeze was coming, Brian Maxted, then-chief operating officer of Kosmos, telephoned US Ambassador Teitelbaum, according to a diplomatic cable. Maxted worried that the Ghanaian government was trying to damage the company’s reputation and force a sale to the state’s oil company at a reduced price.

A day later, Teitelbaum met with Ghana’s attorney general and urged the administration that any dispute with Kosmos “be resolved transparently and within rule of law,” according to the cable. His efforts seemed to work out for Kosmos: By the end of the month, the Bank of Ghana had unfrozen the company’s assets, without explanation.

A few months after that, the State Department again went to bat for the US oil companies. In February 2010, according to one of the Teitelbaum’s cables, Joe Oteng-Adjei, Ghana’s energy minister, sent a letter to ExxonMobil saying the government would be unable to support the sale and that Ghana’s state-run oil company wanted to buy the stake itself at “fair market value.”

Teitelbaum pushed back on ExxonMobil’s behalf. The ambassador “raised objections to statements in the ExxonMobil letter” with two Mills administration officials, he wrote. Johnnie Carson, Clinton’s assistant secretary of state for African affairs, repeated those concerns in a meeting with President Mills himself that month.

Around the same time, Carson met in Accra, Ghana’s capital, with representatives from Western oil companies, including Kosmos, Anadarko, and Tullow. Kosmos’s representative fumed that Ghana had “systematically interfered” with the sale, according to a cable, and told Carson the sanctity of the company’s contracts with the government was “out the window.”

Carson agreed that Ghana must honor its contracts with Kosmos. In a cable, he wrote that he “assured them we would be discreet if they need us to be,” without specifying what the State Department would do.

In the following months, according to The Enquirer newspaper in Ghana, Oteng-Adjei, the energy minister, was initially denied a visa to the US when trying to meet with Kosmos’s investors. Later, Ato Ahwoi, chairman of GNPC, was also denied a visa to the US, the paper reported.

The State Department said that it is not allowed to comment on visa denials under US federal law. Oteng-Adjei could not be reached for comment. When contacted by phone by BuzzFeed News, Ahwoi would neither confirm nor deny that his visa was denied.

“I’m not going to give you any information that can be used against Hillary Clinton,” Ahwoi told BuzzFeed News. He then added, “I don’t recollect anything that I told the newspaper.”

President Mills turns on the valve to allow the first barrel of crude to flow from the Jubilee offshore oil field in December 2010. Ho / Reuters

In the spring of 2010, the Justice Department dropped its investigations against Kosmos and EO Group. It’s unclear why. (Peter Carr, a Justice Department spokesperson, declined to comment.) Even so, ExxonMobil was having second thoughts about pursuing Kosmos’s stake in Jubilee.

Over the next few months, ExxonMobil and Kosmos dispatched representatives to Ghana to meet with the Mills administration and see if the deal could be salvaged. President Mills was expected to issue a decision on whether ExxonMobil could operate the Jubilee oil field following the talks. In an August meeting closely followed by Secretary Clinton, Carson again met with the Ghanaian president to make the State Department’s case.

But before Mills made an announcement, ExxonMobil decided to pull the plug itself.

“Hold on to your chair,” Carson wrote to Teitelbaum in an August 16, 2010, email, which was immediately forwarded to Clinton. “ExxonMobil’s senior management had just informed Kosmos/Blackstone that they were exercising a clause in the Kosmos-ExxonMobil sales agreement to cancel the deal.”

When asked by BuzzFeed News about the terminated deal, Jeffers, the ExxonMobil spokesperson, said, “It’s not our practice to discuss commercial matters.”

Kosmos executives were “stunned,” Carson’s email said. The December 2010 start date for oil production loomed, and Blackstone and other investors were eager to get a return.

So after turning down a last-ditch joint bid from Ghana’s and China’s state-run oil companies, Kosmos brokered a truce with the Ghanaian government. It promised to pay Ghana’s oil company a fee of $23 million, according to Kosmos filings with the SEC.

Kosmos, originally conceived as solely an oil exploration company, had decided to get into the oil pumping business. To finance the oil production, the company went public.

The initial public offering gave Kosmos Energy’s backers, Blackstone and Warburg Pincus, what they had been pressing for: the opportunity to sell their stakes and claim a profit. Altogether, these investors (and others) had put $1.05 billion into Kosmos, according to an SEC filing. On the day Kosmos stock began trading in 2011, the company was worth six times that much.

Things have not gone as well with Ghana’s share of Jubilee revenue.

The government had trouble managing not just its share of the oil revenue, but also the public’s high expectation for improving life in Ghana. And as the global price of oil sunk, in 2014 Ghana sought financial help from the International Monetary Fund, the organization that once said Ghana was on the cusp of becoming a middle-income country.

Johnnie Carson did not respond to interview requests made through the United States Institute of Peace, where he is a senior adviser. The State Department declined to make Donald Teitelbaum available for interview, and a department representative said, “As a matter of policy, we will not comment on the content of allegedly leaked materials‎.” K. Riva Levinson’s firm, KRL International, also declined to comment.

“We have moved beyond our early difficulties in Ghana and now enjoy a very good relationship with the government, which rightly sees Kosmos as a long-term partner in building Ghana’s future,” Thomas Golembeski, Kosmos Energy’s vice president of corporate communication, told BuzzFeed News by email.

“It took a long time and a lot of work to reach this point and, in our view, there’s no sense in reliving the past,” he wrote. The company declined to comment further for this story.

Brennan Weiss contributed reporting from Ghana.
Source:  https://www.buzzfeed.com/dinograndoni/oil-in-ghana?utm_term=.higxoE0X8#.oeK796ABE

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