ENRON and the End Run
by Ron Callari
Enron's
demise went virtually unnoticed for months while the rhetoric of the day focused
on the War on Terrorism. When stocks plummeted from the high $90s and $80s to
a paltry "shave and haircut - two bits", the television networks and major national
daily newspapers were not very quick on the uptake in reporting the unfolding
developments of this company's financial crisis.
When the exposes did finally clear the airwaves, very little surfaced regarding Enron's dealings in Southeast Asia.
Any war worth its salt deserves a nifty conspiracy theory, and the war on terrorism is no exception. When the first blush of patriotism swept through the US like virgin snow cleansing our landscapes, many believed our cause was just and military engagements were warranted. However, in the succeeding months criticism has grown in other camps that conclude the U.S. bombing of Afghanistan was not really aimed at toppling the Taliban and nabbing Osama bin Laden. It's about gaining access to Central Asian oil and natural gas.
Ah… natural gas you say? Could the number one bankrupt company in the world, in addition to all its other woes have had any additional misdealings in the land of jihad? Could the irony of ironies link these two world events together? And if so, how did Enron initiate this 'end run' and why did this secretive play miss the radar screens?
With all the devious subterfuge now inferencing a Bush/Cheney/Enron connection, one has to wonder whether Enron played a role in the "Pipelinestan" dilemma that has plagued our involvement in Afghanistan for the last decade? Enron had a huge stake in a natural-gas-fired power plant in India. Enron had a huge problem in finding cheap gas to fuel that plant.
To find a link, one has only to connect the dots.
This war will set the boundaries of U.S. and Russian influence in Central Asia, a region previously dominated by the former Soviet Union, with strong influence from Iran and Pakistan. And it will carve up the oil and gas resources of the Caspian Sea.
The United States would like to dominate the Caspian Sea and Central Asian oil in order to reduce dependency on oil from the Persian/Arabian Gulf, which it cannot control.
The only existing export routes from the Caspian Basin lead through Russia.
"Those who control the oil routes out of Central Asia will impact all future direction and quantities of flow and the distribution of revenues from new production," said energy expert James Dorian in Oil & Gas Journal ironically on September 10, 2001.
The United States, Russia and US oil companies are currently struggling with each other to lay down pipeline routes that leverage control of the flow of oil and favor political and profitable interests.
Consequently, the US involvement is also poised to challenge Russian hegemony over Central Asia.
Hence the dilemma. The construction of oil and natural gas export pipelines through Afghanistan were under serious consideration for the US in the mid-1990s.
In 1996, Unocal, one of the world's leading energy resource and project development companies won a contract to build a 1,005-mile oil pipeline in order to exploit the vast Turkmenistan natural gas fields. It would extend from the Afghanistan-Turkmenistan border, through Afghanistan, crossing the Pakistani border and terminating in Multan, Pakistan.
A potential 400-mile extension from Multan to New Delhi was also under consideration. Estimated cost of the project was $1.9 billion for the segment to Pakistan, and an additional $600 million for the extension to India...
Bingo…a natural gas supply for Enron's deal!
A precedent was already set when Enron tried to build a gas pipeline in Argentina in 2000 and proposed to pay 15 percent of the international market price for gas. Rodolfo Terragno, Argentina's form Minister of Public Works said he was pressed on Enron's behalf in 1988 by "a son of the vice president," who he believes was George W. Bush.
But let's step back a bit to understand the underpinnings of Enron's financial investment in India. Begun in 1992, Enron's Dabhol power plant in the Maharashtra state near Bombay was to have gone online by 1997. The liquefied natural gas power was supposed to have supplied energy-hungry India with more than 2,000 megawatts of electricity, about one-fifth the new energy needed by India each year. Enron's investment was $3 billion, one of their largest development project and the single largest direct foreign investment in India's history.
The flaw was that the Indian consumers could not afford the cost of the electricity produced.
To cut costs Enron needed to fuel the plant with a new source of natural gas.
Enron, the largest contributor to the Bush-Cheney campaign of 2000, won a contract to conduct a feasibility study for a US$2.5 billion trans-Caspian gas pipeline which would have been built under a joint venture agreement signed in February 1999 between Turkmenistan, Bechtel and General Electric Capital Services. For Enron, the upside was clear. Entering the Indian market, which offered vast growth potential, would position Enron well in the global marketplace and offset some of their losses in other markets.
Then what went wrong?
The book "Bin Laden: the Forbidden Truth" by Jean-Charles Brisard and Guillaume Dasique reveals that the US Government tried to negotiate the pipeline deal with the Taliban as late as August, 2001. The Bush administration was trying to get the Taliban on board with the pipeline idea, and believed they could depend upon the regime to be stable enough to see it built. The rationale for these actions is simplicity itself: Bush's campaign was funded by the energy industry, and negotiations like this were their payoff. The business of America is business.
The question that arises: Was the pipeline deal a reason for the optimism of Kenneth Lay during this period of time? There is no question that Enron was Bush's favorite company. If the pipeline was to happen, it is easy to imagine that Enron would have been the recipient of these good tidings. Lay would have known this. His last documented email was sent on August 27th, about the same time as the last U.S./Taliban meeting. If a deal was near at hand, and if he knew that his company was about to get a plum government contract, he had every reason to be optimistic about the future.
However, from all records, relationships became strained. The Taliban had demanded that US should also reconstruct Afghanistan's infrastructure and that the pipeline be open for local consumption. Instead, Unocal wanted a closed pipeline pumping gas for export only and was not interested in helping to rebuild the country.
In turn, the US threatened the Taliban during the negotiations. The directive of "we'll either carpet you in gold or carpet you in bombs" was bantered about in the press to underscore the willfulness of the US's cause.
Sometime in late August the deal went sour, on the heels of September 11th.
Is this why Arthur Andersen was ordered to shred documents? Did those documents detail the preparations for the pipeline, thus demonstrating the possibility of Bush and Cheney dealing with the Taliban? Were the consequences of releasing these documents more damaging than the consequences of destroying them because of this?
Vice President Dick Cheney has stated that the White House is prepared to go to court to fight the release of documents demanded by the GAO as part of the investigation into any influence the Enron Corporation had in formulating the Bush administration's energy policy. And if a court case does take place, the obvious questions. Did Enron lobby Cheney for help in India? Did the White House order the State Department to add Enron to its program? And what other special favors did Enron ask and receive?
When Cheney was President Ford's chief of staff, his Secret Service code name was "Backseat" because of his determination to maintain a low public profile. In this administration Cheney's day-to-day whereabouts continues to be one of the administration's most closely guarded secrets. So much so, that he has become the but of the joke in editorial cartoons and on late night talk shows. It may be this secretive nature that finally puts in the public spotlight.
Yet, by any measure, the near-decade-old project to build India's largest power plant has been a disaster. As Enron files for bankruptcy and looks for ways to divest itself of its Dabhol interests, the project is still unfinished and has produced no electricity.
Ironically, however, the pipeline plan could be dusted off yet again. "Once we bomb the hell out of Afghanistan, we will have to cough up some projects there, and this pipeline is one of them," Matthew Sagers of the corporate consulting firm Cambridge Energy Research Associates, told The New York Times.
On December 31, 2001, President Bush appointed Zalmay Khalilzad, former Unocal consultant and Taliban defender as special envoy to Afghanistan. Today, Khalilzad is the Special Assistant to the President and National Security Council member responsible for setting up the post-Taliban "Pro-Unocal" regime in Afghanistan. International oilmen euphemistically call the project the new 'Silk Road'.
It's the latest chapter in a story as old as U.S. military adventures overseas -- the U.S. government uses its armed might to promote the interests of big business.
The lessons of Dabhol may be like the larger lessons of the Enron debacle. A company known for its hubris tried to accomplish too much, too quickly, playing fast and loose with the financial realities and counting on political allies to clear the way.
Unfortunately, for Enron, time had run out. Its misdealings elsewhere had caught up with them. The 'end run' in the last quarter of 2001 was played too late and the "pipe dreams" for the future did not come in on schedule. In the end, Enron found that even its enormous political clout could not override the rules of economics. ***
© 2002 Ron Callari
See more of Ron's work at his website HERE.
COPYRIGHT © 2002 BY THE AMERICAN PARTISAN. All writers retain rights to their work.
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