Monthly Archives: April 2004

Doing business in Russia — not for the fainthearted

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On the heels of this announcement regarding Russian oil giant Yukos’ default on $1 billion in bank debt, this Wall Street Journal ($) article provides an excellent overview of Exxon‘s travails in attempting to make a major investment in Yukos. The entire article is well worth reading, and here are several excerpts:

Exxon and many other Western oil companies had big ambitions when they flocked to Russia looking for deals after the collapse of communism in 1991. Once the world’s largest oil producer, the former Soviet Union represented the biggest new opportunity for the world’s oil companies in a generation.
But the story of Exxon’s delicate dance with Russia shows that the opportunity has been much more elusive than the oil giants and the Western political leaders hoping for an alternative to Middle Eastern oil envisioned. Russian President Vladimir Putin, whose methodical strengthening of Kremlin authority has fueled fears he is undermining democracy, has increasingly sought to keep the state’s hand in the oil industry, which was almost completely privatized in the 1990s.
U.S. officials privately acknowledge that highly publicized efforts to diversify energy sources by cooperating with Russia have largely turned out to be a dry hole. Exxon officials declined to comment on anything related to a possible Yukos pact. The Kremlin press office declined to respond to a detailed request for comment.

As Exxon pursued the investment with Yukos president, Mikhail Khodorkovsky, the following exchange and incident occurred after one negotiating session:

After the session, where the exchange about Russia’s oil reserves took place, Mr. Khodorkovsky was asked if the Kremlin would allow him to sell a majority stake. “Political realities here change every day,” he said.
Moments later, as most panelists and audience members crossed the hall for a speech by President Putin, Mr. Khodorkovsky got an urgent cellphone call from his wife. She told him their house was surrounded by police.

As Exxon pressed on for an investment in Yukos, Russian government control tightened:

In an interview published that day on the Kremlin’s Web site, Mr. Putin was asked his view of Exxon buying 40% of Yukos. Mr. Putin said he would support Exxon’s activities, but that “it would be right” for Exxon to consult in advance with the Russian government on such a large deal. Russian oil-industry executives detected a cautionary tone, but Exxon officials remained confident their deal was on track, according to people familiar with the situation.
Mr. Khodorkovsky held a defiant news conference at Yukos’s new Moscow headquarters the Monday after the police searches. “If the goal is to drive me from the country or put me in jail,” he told a room packed with TV cameras and reporters, “they’d better put me in jail.”
On Oct. 25, they did. Heavily armed agents stormed onto his rented jet at a refueling stop in Siberia. He was flown back to Moscow.

The message from Exxon’s experience is clear — Russia will gladly accept foreign investment so long as Russian control of the assets and business is not disturbed. Frankly, Russia needs a few (maybe more) of dwindling foreign investment before its unrealistic position will change.

Making peace with pot

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Eric Schlosser writes this interesting op-ed in the NY Times on the continued high costs associated with the criminalization of marijuana use, in which he observes:

This year the White House’s national antidrug media campaign will spend $170 million, working closely with the nonprofit Partnership for a Drug-Free America. The idea of a “drug-free America” may seem appealing. But it’s hard to believe that anyone seriously hopes to achieve that goal in a nation where millions of children are routinely given Ritalin, antidepressants are prescribed to cure shyness, and the pharmaceutical industry aggressively promotes pills to help middle-aged men have sex.

Vijay wins Shell Houston Open

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Vijay Singh — the second-ranked golfer in the World Rankings — won the rain-delayed Shell Houston Open today by two strokes with a 72 hole total of 277, 11 under par. Singh shot a 69 in the final round to hold off 48 year old Scott Hoch, who shot a 68 and finished in second place at 279. Here is the final leaderboard.

Citgo moving to Houston

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Citgo Petroleum Corporation. is expected to announce today that it plans to relocate its headquarters from Tulsa, Oklahoma to Houston. In addition to the economies of being located among Houston’s many major energy companies, the move makes sense because most of Citgo’s vendors, and the customers of Citgo’s parent — Petroleos de Venezuela SA — are located in Houston. Update: Here is the Chronicle story on the move.
Citgo is the nation’s fourth-largest retailer of gasoline, with 13,500 outlets. It also operates three oil refineries in the United States and owns a 42 percent interest in another refinery in Houston. The company will move approximately 700 jobs to Houston, leaving about 300 in Tulsa. As an inducement to make the move, Citgo will receive a $5 million grant from the state of Texas and $30 million in low-interest loans from the cities of Houston and Corpus Christi, where Citgo operates a major refinery.

The NFL as Lake Wobegon

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John McClain, the Houston Chronicle’s National Football League writer, apparently believes that the NFL is a bit like Garrison Keillor’s fictional Minnesota town Lake Wobegon, where “all of the children are above-average.” In today’s Chronicle here and here, McClain rates 23 out of the 32 NFL teams as having better than average selections at this past weekend’s NFL Draft.

SCI settles class action lawsuit

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Houston-based Service Corporation International, the world’s largest funeral and cemetery company, announced late last week that it had entered into a memorandum of understanding to settle the securities class action lawsuit that has been pending in U.S. District Court in Houston against SCI and certain of its current and former officers since January 1999. The suit alleges that SCI made misrepresentations concerning its prearranged funeral business and other financial matters. The settlement is for $65 million, with SCI’s insurers ponying up $30 million of the settlement payment.

St. Augustine was right

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Randall Parker over at FuturePundit points to an interesting Erin Anderssen and Anne McIlroy article in the Canadian Globe And Mail that summarizes recent research on child development and human violence. They report that Richard Tremblay has found that two year old babies are more physically aggressive than teenagers or adults but are simply too uncoordinated to do much damage to others:

Consequently, are human beings born pure, as Rousseau argued, and tainted by the world around them? Or do babies arrive bad, as St. Augustine wrote, and learn, for their own good, how to behave in society?
Richard Tremblay, an affable researcher at the University of Montreal who is considered one of the world leaders in aggression studies, sides with St. Augustine, whom he is fond of quoting.
Dr. Tremblay has thousands of research subjects, many studied over decades, to back him up: Aggressive behaviour, except in the rarest circumstances, is not acquired from life experience. It is a remnant of our evolutionary struggle to survive, a force we learn, with time and careful teaching, to master. And as if by some ideal plan, human beings are at their worst when they are at their weakest.
St. Augustine was obviously much closer to the truth.

Read the entire post, as Mr. Parker includes a number of interesting links relating to the subject of this research. Hat tip to Tyler Cowan at Marginal Revolutions for the link.

Fiddling while Rome burns

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This NY Times article reports on a couple of remarkable public meetings just outside London last week in which radical Islamic fascist clerics suggested that Tony Blair should be killed and that an Islamic flag should be hanging outside No. 10 Downey Street. The article notes as follows:

Stoking that anger are some of the same fiery Islamic clerics who preached violence and martyrdom before the Sept. 11 attacks.
On Friday, Abu Hamza, the cleric accused of tutoring Richard Reid before he tried to blow up a Paris-to-Miami jetliner with explosives hidden in his shoe, urged a crowd of 200 outside his former Finsbury Park mosque to embrace death and the “culture of martyrdom.”
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On Thursday evening, at a tennis center community hall in Slough, west of London, their leader, Sheik Omar Bakri Mohammad, spoke of his adherence to Osama bin Laden. If Europe fails to heed Mr. bin Laden’s offer of a truce ? provided that all foreign troops are withdrawn from Iraq in three months ? Muslims will no longer be restrained from attacking the Western countries that play host to them, the sheik said.
“All Muslims of the West will be obliged,” he said, to “become his sword” in a new battle. Europeans take heed, he added, saying, “It is foolish to fight people who want death ? that is what they are looking for.”
One chapter in Sheik Omar’s lectures these days is “The Psyche of Muslims for Suicide Bombing.”

Call me old fashioned, but I am appalled that these clerics — one of who is already under investigation for a serious crime — could spew this type of subversion without apparent qualm. The reason they can get away with it is explained later in the article:

Though the British home secretary, David Blunkett, has sought to strip Abu Hamza of his British citizenship and deport him, the legal battle has dragged on for years while Abu Hamza keeps calling down the wrath of God.
Despite tougher antiterrorism laws, the police, prosecutors and intelligence chiefs across Europe say they are struggling to contain the openly seditious speech of Islamic extremists, some of whom, they say, have been inciting young men to suicidal violence since the 1990’s.
The authorities say that laws to protect religious expression and civil liberties have the result of limiting what they can do to stop hateful speech. In the case of foreigners, they say they are often left to seek deportation, a lengthy and uncertain process subject to legal appeals, when the suspect can keep inciting attacks.
That leaves the authorities to resort to less effective means, such as mouse-trapping Islamic radicals with immigration violations in hopes of making a deportation case stick. “In many countries, the laws are liberal and it’s not easy,” an official said.

No joy in Mudville

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Houston was Mudville on Sunday.
First, incessant rains since Friday afternoon in Houston have played havoc with the Shell Houston Open. Third round play in the golf tournament was suspended late Sunday morning, and the third and fourth rounds will now be completed on Monday.
Second, the Rockets blew a four point lead in the final minute and a half of overtime and lost to the Lakers 92-88 in their NBA Playoff game. The Rockets are now down 3-1 in the best of seven series, and almost certainly will be eliminated in the next game on Wednesday in L.A.
Finally, the Stros wasted a brilliant pitching performance from Wade Miller and lost to the Rockies in the final game of their series, 4-1. The Stros now move on to Pittsburgh for a three game set with the Pirates starting Tuesday before coming home for a weekend series with the Reds.

Rich Uncle of America

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This David Brooks NY Times books review discusses Ron Chernow‘s new book, “Alexander Hamilton.” Hamilton is the architect of American capitalism, and Mr. Brooks’ review concludes that Mr. Chernow has written the best biography yet of this fascinating but underappreciated man. For example, Hamilton’s youth was no picnic:

When Alexander Hamilton was 10, his father abandoned him. When he was around 12, his mother died of a fever in the bed next to his. He was adopted by a cousin, who promptly committed suicide. During those same years, his aunt, uncle and grandmother also died. A court in St. Croix seized all of his possessions, sold off his personal effects and gave the rest to his mother’s first husband. By the time he was a young teenager, he and his brother were orphaned, alone and destitute.

Incredibly, however, Hamilton overcame his tortured youth quickly to excel in the American revolutionary society and government:

Within three years he was a successful businessman. Within a decade he was effectively George Washington’s chief of staff, organizing the American revolutionary army and serving bravely in combat. Within two decades he was one of New York’s most successful lawyers and had written major portions of The Federalist Papers. Within three decades he had served as Treasury secretary and forged the modern financial and economic systems that are the basis for American might today.

Finally, Mr. Brooks notes that the vicious political rhetoric of our day has its roots in Hamilton’s legendary disputes with Thomas Jefferson:

Though they were historic, Hamilton couldn’t have enjoyed his years at the Treasury Department. These days we think our politics are nasty and partisan. But our discourse looks like a Platonic symposium compared with the vicious fighting that marked the early Republic. While they were secretaries of treasury and state, Hamilton and Jefferson waged internecine warfare that was, as Chernow notes, of ”almost pathological intensity.” Members of each man’s camp wrote abusive newspaper essays against the other. The secretary of state proposed Congressional legislation censuring the secretary of the Treasury. The Jeffersonians fabricated crude lies about Hamiltonian embezzlement schemes.
This fight was about what sort of country America should be, and what sort of people should govern. Hamilton embraced the urban, enterprising virtues: vigor, drive, competition. Jefferson dreamed of a country that would be pastoral, egalitarian and decentralized. Hamilton won the battle, but not the affections of posterity.

Hamilton has always been one of the most fascinating and enigmatic of the Founding Fathers. In many ways, he is the most quintessential American of them all. As such, I am looking forward to reading this interesting new book.