As reported by National Geographic, that’s what four of the most accomplished climbers in the world are doing right now. They’re ascending Mt. Everest—the tallest mountain in the world (above sea level.) It towers nearly 8,850 meters. That’s nearly nine kilometers tall! (In feet and miles, the mountain is about 29,030 feet or 5.5 miles tall!) Commercial airlines cruise at about 35,000 feet or 6.6 miles or nearly 11 kilometers.
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The following came from the National Geographic article.
The team began its ascent on March 30. Over the next two months, the climbers will make their way up the world’s tallest mountain in dangerous conditions, fighting hypothermia, altitude sickness, and sheer physical exhaustion to achieve something few can boast.
Mountaineer Peter Whittaker gathered the group as part of a quest to continue his family legacy; he is the nephew of legendary explorer Jim Whittaker, the first American to summit Mount Everest in 1963. Joining Whittaker is Ed Viesturs, a veteran mountaineer who has summitted all 14 of the world’s highest peaks without the aid of bottled oxygen; Dave Hahn, who is going for a record 11th Everest ascent; and Melissa Arnot, who is attempting to become the first female American to summit Everest without supplemental oxygen.
Mt. Everest belongs to the Himalayan range. Have you ever wondered what force created these mountains? India did, or more precisely, the tectonic plate that India sits on, did.
BP—formerly known as British Petroleum—is currently facing the largest crisis in its storied 99-year history. The crisis is full of superlatives. By any measure, it’s enormous. It involves tens of billions of dollars and the direct employment of almost 100,000 Russians. It’s being closely watched as a harbinger of Moscow’s real intentions—economically and militarily. It has the potential to bring down a giant company. And it involves numerous ethical and legal issues.
Befitting the largest British company, BP shares trade primarily at the London Stock Exchange. Energy is currently a hot industry. Last year, BP was the fourth largest company in the world measured by revenue, preceded only by Exxon-Mobil and Royal Dutch Shell.
In 2003, BP bet big. For starters, it invested $6.15 billion for 50% ownership in a joint venture called TNK-BP. This was just for starters. BP took this gamble not only because of the enormous potential of Russia’s Siberia but also because it’s traditional haunts in the North Sea, Gulf of Mexico, and Alaska had become prohibitively expensive, its proven reserves were perilously low, and its global oil production (on which its revenue depended upon) was declining. In short, BP was desperately looking for new fields (literally) to mine.
But why Russia? Virtually all the other oil majors, with the exception of Royal Dutch Shell, had steered clear of it. BP’s peers had concluded (and it appears, rightfully so) that Russia’s legal fabric was still unproven. Why is its legal fabric so important? Russia has historically been an autocratic state. Its recent behavior in Georgia is indicative of the way the Russian government pursues its objectives. It shoots first and then presents the world with a fait accompli.
BP was undeterred. It forged ahead. The promise of enormous gas and oil reserves, low cost, and the advantages of vertical integration—from the ground through the pipes to the consumer—was irresistible. It was willing to risk bad governance, a corrupt judiciary, venal bureaucracy, combative local partners, organized crime, and capricious legislation. It boldly proclaimed that Russia is changing for the better. Russia’s fledgling democratic society is becoming stable. Russia needs foreign investment and will give its investors at least a level playing field. It has to behave like a civilized country of laws for it to retain its status as an inviting place for investment.
It seems to have fooled itself. Whether or not it deluded itself, this is a dangerous type of managerial delusion. It puts a lot of jobs, not to mention resources, at risk—if the decision, in fact, was a product of managerial delusion.
A HISTORICAL PERSPECTIVE
I think Senator McCain, the current Republican candidate for the US presidency, said it best. In a campaign interview last month, he said:
Let me put a little bit of historical perspective on this. I think all of us had [developed] a kind of a romanticized view of the world after the fall of the Soviet Union. There was a period of time when we saw dramatic progress around the world of countries attaining democracy [referring primarily to the former vassal states of the USSR]. Many assumed that it was almost automatic that China and Russia would inexorably [follow] a path toward democratic and free societies. Then we saw Tiananmen Square, the chaos [including the attempted coup d’état] in Russia and their diminished stature in the world. Now Vladimir Putin and company are eager to reassert [their centuries-old self-image of being one of the major powers in the world].
So, in other words, great economic progress did not mean the diminishment of autocracies. I still believe that history will show that democracy and freedom go hand in hand with economic development, sophistication, and the technologies that enable the free flow of information. I think we all are realizing that progress is not going to be as rapid as we may have thought it was going to be in the halcyon days of the 1990s.
Assassination continues to be one of their tools (referring to Alexander Litvinenko), oil, brazen attacks on civilians (in Chechnya, etc.), outright attacks on the pretext of protecting its citizens (in the breakaway provinces of South Ossetia and Abkhazia in Georgia).
I don’t think we’re going to reignite the Cold War. I don’t think there’s going to be a nuclear confrontation with Russia. I do think there’s going to be a dramatically different relationship.
We should always try to maintain relations and communications with every country in the world. But never confuse national interests with personal relationships.
Comment: Incidentally, that’s what President Bush did back in 2001. His famous remark was “The more I get to know President Putin, the more I get to see his heart and soul ...the more I know we can work together in a positive way.” Sorry George, you’re very wrong on that one. Putin is a former KGB agent. What were you thinking?
Three short years later, by 2006, TNK-BP went on stream. In its 2007 Annual Report, BP announced that TNK-BP accounted for 25% of its global oil production and contributed 15% of its net income. From 2003 to 2006, BP claimed that it had earned enough dividends to recoup its initial investment. Indeed, by the third quarter of 2006, BP’s share of revenue amounted to $6.9 billion. (I’m not clear on the source or nature of these “dividends.” The term might be used generically.) Not so prominently mentioned was the fact that BP has no other major projects on stream that could take TNK-BP’s place.
The economic climate turned around in 2007. Russia had tasted the wealth and power that comes with being the major supplier of Europe’s energy needs. Now the real Russia came out.
RUSSIA MAKES ITS MOVES
In December 2006, it forced Royal Dutch Shell along with its Japanese partners, Mitsui and Mitsubishi, to sell its controlling stake in Sakhalin-2. This was a $22 billion stake. This is not an amount to trifle with—even for the oil majors. Russia was able to impose its will anyway. How? It used a government environmental agency (just like the EPA of the US government) to threaten to freeze work on the project.
Since then, Russia has focused its efforts on harassing BP. It uses a combination of tactics—the same environmental agency, the tax revenue police, the justice police, and, most ominously, the FSB (the modern-day successor of the KGB).
The results were predictable. There is no contest between one of the largest companies in the world against the largest country in the world.
By June 2007, BP agreed to sell one of TNK-BP’s prize assets—one of the world’s largest natural gas fields—to Gazprom. The latter is a Russian state company and a monopoly. The leverage used by the Russians was typical: the threat to revoke the company’s license to develop the gas field. The Russians window-dressed the transaction. Gazprom would “buy” it from BP for $700 to $900 million. BP will take a huge opportunity loss on this. Analysts estimate that the gas field, called “Kovykta,” was capable of earning between $1.5 to $2 billion. Furthermore part of BP’s compensation will be the opportunity to invest another $3 billion and form a joint venture with Gazprom.
Comment: Thank you very much. First, you force me to sell at a loss. Second, you’re generous enough to give me another opportunity to lose more money.
BP’s reaction was puzzling, to say the least. Its CEO welcomed the arrangement as the start of a new strategic partnership with Gazprom. Furthermore, in the same speech (given in Moscow, incidentally), BP’s CEO praised BP’s business progress and encouraged other companies to invest in Russia. He called the gas field dispute just “one of those bumps in the road.” Of course, this was probably smoothing the crisis on the surface. Wait and see and until then, pretend everything is going smoothly.
Thirteen months later, in July 2008, BP-TNK’s CEO was effectively ousted. Moscow’s tactic: the non-renewal of the expatriates’ work permits. Affected with the CEO were 150 senior engineers of BP. Moscow presented BP with one small consolation—the CEO was still the CEO and could continue to run the company albeit from overseas.
CAN WE DRAW SOME CONCLUSIONS?
Would you agree that the following conclusions can be drawn from this story?
Russia is pursuing a policy of state control. It lures Western oil companies and, over time, makes them junior partners. It needs Western investment and technology and is only intent on building its own capabilities.
It will not use bald-faced tactics to expropriate Western investments. Instead, Moscow uses its entire arsenal of laws and regulations to harass its foreign partners until it achieves its goals. Time and location are on Russia’s side.
Russia’s power elite, led by Putin, will not hesitate to apply these same tactics to domestic enemies. The former owner of Yukos, Russia’s first large oil company, dared defy Putin in 2003. Yukos was looted and eventually absorbed by Russia’s state owned oil company, Rosneft. As for the billionaire who defied Putin, he now languishes indefinitely in an obscure penal colony close to the Russian-Mongolian-Chinese border. Apart from him the other big losers were Western banks who were owed more than $1 billion.
It’s obvious that Russia is leveraging its power as the single largest fossil fuel producer (second after the entire OPEC cartel) to re-arm itself. Russia’s goal is to return to its place as one of the world’s superpowers. This goal can only be attained by developing its industrial and military capabilities. To this end, it is vital for Russia’s oil and gas to stay within Russia’s border until it reaches its European customers. This is a major reason for its hostility to the West and to its former satellite states for daring to build a trans-Caucus pipeline.
WHY DID BP MAKE THIS DECISION?
Why did they take such an enormous risk especially since most of their peers, save another one (Royal Dutch Shell), played it safe?
It won’t do much good to second guess the board’s decision. The agreement to go ahead was signed with much publicity. Putin even flew to London for the event. BP’s decision doesn’t seem like it was made secretively.
A clue may be found in the reported condition of BP’s board in 2001 till 2003. It seems that BP’s board was dysfunctional. The CEO, Lord Browne, led autocratically and not by consensus. He was forced out in 2007—for reasons unrelated to BP’s Russian investment. Various unflattering portraits of him can be found on the Web. Four examples are:
The Houston Chronicle - BP is the largest investor in US energy development. Most of that is in Texas.
I mentioned decision-making delusions that plague executives earlier. Click here for a link to a blog entry that discusses the subject. It’s based on a critical review of a book entitled The Halo Effect.
Click here for a link to a guide for making good decisions:.
Bottom line: The shareholders (among many other observers) probably held their collective breath for the first few years. They must have been pleased, even euphoric, at the results as reported by the 2007 Annual Report. The rapidity of successive setbacks that began in 2007 to the present day must be shocking them.
I suspect the board fulfilled its responsibilities—ethical and legal—to its shareholders and to the greater society. Fortunately for management, the results from the first few years validated their decision. I wonder if any activist shareholders plan to file a derivative suit or the equivalent in the UK. But what would the suit’s legal theory be based on?
A final note about Lord Browne: he was rewarded with a parachute (a very, very modest one by US standards—it was only $4 million!) when he retired.
THE ROCKY RELATIONSHIP BETWEEN THE US AND RUSSIA
The relationship of the US with Russia has always been rocky. The US helped Russia beat back the Nazi onslaught. It wouldn’t be an exaggeration to say that without the help of the US, Russia would’ve fallen.
After the USSR fell in 1991 and the US poured billions into assisting the former adversary, I wondered what the heck was going on. I could understand our assistance in so far as the USSR’s former nuclear arsenal was concerned; we certainly don't want any of those weapons to fall into the wrong hands. Unfortunately the technology, i.e., the skills, is more difficult to control. Witness the rogue Pakistan physicist who shared his knowledge with countries whose relationship with US is currently on edge (North Korea, for example).
WHAT NEXT?
In retrospect, it appears that BP was reckless (or bold, depending upon how things would turn out) in investing in Russia. A capitalist-based economy is still new to them. The majority is not used to democracy or freedom. Their present system is merely a continuation of the corrupt system of Communism.
A badly skewed socio-economic system invites corruption on a massive scale.Russia’s entire wealth is concentrated in the hands of about 100 families. It has a population of almost 150 million and a GDP of about $2 trillion. There is a very thin middle class. In many ways, despite its imposing military, Russia is a third country. (National Geographic, 2008)
So returning to BP and its current predicament, it’ll be interesting to see what happens in the next 24 months.
THE PHILIPPINE EAGLE: THE SECOND LARGEST AND MOST ENDANGERED RAPTOR IN THE WORLD
My father is an avid birdwatcher. It's too bad that he doesn't watch birds in the remote forests of the Philippines. If he did and was lucky, he might catch a glimpse of the Philippine eagle. The photos came from last month's issue of National Geographic Magazine. The February 2008 issue contained an article about the Philippine Eagle.
This raptor is the second largest and most endangered eagle in the world. Currently, this bird of prey is confirmed to exist in just four Philippine islands: Mindanao, Luzon, Leyte, and Samar. Scientists estimate that perhaps only a few hundred pairs remain in the world.
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When the first humans arrived in the Philippines from adjacent Asia many thousands of years ago, they found an archipelago that was remarkably rich in natural resources. The seas were inhabited by the earth's most diverse marine communities on earth, providing an abundant source of food throughout the year.The land was covered almost entirely by rain forest that provided them with meat from wildlife, building materials, and seemingly everlasting supplies of clear, cool water.
Those natural resources have been squandered, so badly damaged by over-use, mismanagement, and greed that recovery is uncertain, and collapse seems to be a real possibility. The nation now faces stark alternatives: a decline from the biologically richest place on earth to environmental devastation, or recovery from the current brush with disaster to a point of stability. To understand the origin of this dramatic and terrible situation, we must begin with history, but must end with societal and personal choice.
Few countries in the world were originally more thoroughly covered by rain forest than the Philippines. Brazil has extensive savannah and brush; Indonesia has many dry islands; Kenya and Tanzania have only small patches of rain forest. A few hundred years ago, at least 95 percent of the Philippines was covered by rain forest; only a few patches of open woodland and seasonal forest, mostly on Luzon, broke the expanse of moist, verdant land.
By the time the Spanish arrived in the Philippines in the 16th century, scattered coastal areas had been cleared for agriculture and villages. The only domestic grazer was the water buffalo, and pastureland was very limited. Some forest had been cleared in the interior as well—particularly the terraced rice lands of the central cordillera mountain range of northern Luzon—but most coastal areas and the richest of the lowlands remained completely forested, broken only by the occasional cultivated clearings. By 1600, the human population of the Philippines probably numbered about 500,000, and old-growth rain forest over 90 percent of the land, home to thousands of plant and animal species interacting in the web of life that sustained the human population.
With a wingspan of two meters (seven feet) and a weight of up to 6.5 kilograms (15 pounds), the species casts an impressive shadow as it soars through its rain forest home. Its long tail helps it skillfully maneuver while hunting for its elusive prey, like flying lemurs or palm civets.
Known for its large, deep bill and spiky crest, the Philippine eagle is arguably the most majestic creature in the rain forest.Its blue-gray eyes, unique among raptors, add to its striking appearance. The bird’s call is a loud, high-pitched whistle. Both female and male eagles display their impressive crests when on alert. An eagle twists its head to change its visual perspective and determine an object’s size and distance.
A breeding pair of eagles requires from 40 to 80 square kilometers (25 to 50 square miles) of rain forest to survive. The word "raptor" comes from the Latin root that means "to seize and carry away." Any bird that kills with its feet is a raptor. While they often catch prey in midair, those nesting in large trees in lowland areas search for prey on the ground. Eagles hunt a variety of animals, ranging in size from small bats to 14-kilogram (30-pound) deer. The most common prey is the flying lemur, an arboreal mammal with webbed feet and claws. Other meals of choice include palm civets, flying squirrels, snakes, rats, and birds.
For decades the bird was known as the monkey-eating eagle. A presidential proclamation renamed it the Philippine eagle in 1978, in part to promote national pride in the magnificent endangered bird. In 1995 the Philippine eagle replaced the maya as the national bird.
RETURN TO EVEREST
Mt. Everest belongs to the Himalayan range. Have you ever wondered what force created these mountains? India did, or more precisely, the tectonic plate that India sits on, did.
