Trump Picks Exxon CEO With Putin Ties as Secretary of State

Donald Trump chose Rex Tillerson, Exxon Mobile CEO, as Secretary of State. The nomination comes out later today, according to a transition team insider. The selection worries senators on both sides of the aisle, mostly because of the executive’s history with Russian President Vladimir Putin. Even strong Trump supporters are voicing concerns over potential conflicts of interest, which could lead to a rocky confirmation process. Donald Trump is defending his choice, noting that “a great advantage is he knows many of the players. And he knows them well. He does massive deals in Russia.”

0320_tillerson-putin_1024x576

Is Corporate America the New Diplomatic Corps?

The pick exposes an open secret. After decades of interacting through formal lines of communication, American statecraft now works through informal channels, headed by private citizens. More companies are dedicating resources towards interacting directly with foreign leaders, while trying to win concessions and favorable business conditions. In return, these negotiators are bringing back the demands of these heads of state to the White House. This increases the opportunities for compromise, as there is reduced pressure for the corporate representatives to merely follow protocol.

The question in the diplomatic community is whether relationships built on economic deals can be transferred over into relationships based on peacekeeping. Over the past four years, the United States and Russia have clashed repeatedly over issues such as Ukraine and Syria. These disagreements won’t be settled simply by looking at a balance sheet. Tillerson visited the Obama White House several times to discuss energy policy. His visits increased after 2014 when the last administration imposed sanctions in response to Russia’s military action in Ukraine.

Is Tillerson Too Close to Putin?

Detractors suggest that Tillerson is much too close to Putin to be impartial. Exxon has created partnerships with Rosneft, headed by Putin’s close friend Igor Sechin. Rosneft’s deal earlier this week to sell nearly 20 percent of its shares to Qatari interests may point to a realignment of allies, with the United States, Russia, and the more modern Arab states. Tillerson’s appointment, when considered alongside the recent production deal between Russia and Opec, makes this seem likely. Additionally, while Tillerson is nominated for Secretary of State, Exxon’s environmental policies are suspect. President Obama consistently pushed environmental reforms worldwide to reduce the impact of global climate change. Developing countries such as China and India may be less willing to reduce coal and timber burning if the suggesting comes from a former oil company executive whose industry has repeatedly sacrificed ecology for profit.

Will the Senate Leadership Support the Nomination?

Senator Marco Rubio is already has expressed his opposition to Tillerson as head of the State Department. Rubio is a member of the Foreign Relations Committee, which could potentially block the nomination before it goes up for a Senate vote. The Senator tweeted on Sunday that “Being a ‘friend of Vladimir’ is not an attribute I am hoping for from a #SecretaryOfState.” Aside from specific concerns regarding Tillerson, this confirmation may be the first chance to resolve the power struggle between Trump who was an outsider, and the Republican establishment. Traditional conservatives were steamrolled in the primaries. Voters ignored the Republican opposition at the polls after Trump gained the nomination due to a mostly grassroots campaign. This may be their last chance to influence the Trump administration. If this controversial nomination proceeds without major roadblocks, Trump will have complete control of the Republican Party.

The Democratic Party seeks to align itself with these Republican holdouts. Nearly thirty percent of the House voted against newly re-elected Minority Leader Nancy Pelosi. In light of the election results, the some Democrats are reconsidering whether to work more closely with moderate republicans. Given Trump’s ability to control the opposition, it is likely the nomination will be successful.

How Will the Tillerson Nomination Affect Trading?

The Tillerson nomination could affect trading on a number of assets. Oil should see a significant boost, due to an Exxon executive becoming the second most powerful man in America. Cooperation should increase between America and Russia, likely at the expense of Europe. This could also mean more export opportunities for American companies. Look for the dollar and U.S. based indices to rise. A closer relationship between Russia and the Middle East threatens Europe’s dominance, possibly depressing the euro.