Bad choices

Susan Rice´s large oil investments should disqualify her from becoming Secretary of State.

The insulting treatment of Susan Rice by John McCain and other Republican senators over the real Benghazi tragedy, and manufactured scandal, has worked in her favour as a candidate to succeed Hillary Clinton as Secretary of State.

The complaints about her abrasive temperament don´t stand up either. Niceness is an overrated quality in diplomacy. A moderate and conciliatory tone can easily be misread as weakness: April Glaspie, the US Ambassador to Iraq in 1990, and the British Foreign Office in 1982, failed to threaten Saddam Hussein and General Galtieri repectively that the aggression they were planning would be met, as it was, with war. (The FO was hampered by the absence of diplomatic relations with Argentina; Glaspie was carrying out instructions.) A diplomat uses the temperament she or he has in a disciplined way. When Mr Nice Guy speaks harshly, or Ms Buzzsaw speaks softly, interlocutors read the signs. I´ve not read anything to suggest that Rice lacks the necessary self-discipline.

What disqualifies Ms Rice is her investment judgement. She´s a comfortably wealthy woman; she and her husband had assets of ¨$23,521,177 to $43,543,009¨ in 2009, according to her 2009 financial disclosure report. Good for them both. They are clearly experienced and knowledgeable investors.

But according to Scott Dodd´s reporting for One Earth:

Rice owns stock valued between $300,000 and $600,000 in TransCanada, the company seeking a federal permit to transport tar sands crude 1,700 miles to refineries on the Texas Gulf Coast, crossing fragile Midwest ecosystems and the largest freshwater aquifer in North America.

Beyond that, according to financial disclosure reports, about a third of Rice’s personal net worth is tied up in oil producers, pipeline operators, and related energy industries north of the 49th parallel — including companies with poor environmental and safety records on both U.S. and Canadian soil. Rice and her husband own at least $1.25 million worth of stock in four of Canada’s eight leading oil producers, as ranked by Forbes magazine.

These stakes are not parts of a neutral balanced portfolio. Energy stocks (mostly oil) represent only 10.3% of the value of a representative Vanguard index fund. The Rice household has made an unusually large bet on oil, and Canadian tar sands oil in particular.

The issue is not the specific conflict of interest over the Keystone XL pipeline, on which the State Department has to issue a recommendation next year. It´s that she would have a systematic conflict of interest over the most important foreign policy issue of the second Obama Administration – far more important than Islamic fundamentalism.

The investments also show terrible judgement. Betting your fortune on planet-busting oil means you are one of these three things:

  • a feckless denialist (the proverbial grasshopper)
  • a gutless temporiser (the proverbial ostrich)
  • a heartless cynic (the proverbial scorpion.)

Take your pick. But any of these should disqualify Ms Rice from the office of Secretary of State.

Unkind, you think? Greens should be grateful to that nice Mr. Obama for not being Mitt Romney? What would you say if Ms Rice had invested her money with Peshawar arms dealers? What´s the difference?

No irrelevant comments please on Benghazi.

Author: James Wimberley

James Wimberley (b. 1946, an Englishman raised in the Channel Islands. three adult children) is a former career international bureaucrat with the Council of Europe in Strasbourg. His main achievements there were the Lisbon Convention on recognition of qualifications and the Kosovo law on school education. He retired in 2006 to a little white house in Andalucia, His first wife Patricia Morris died in 2009 after a long illness. He remarried in 2011. to the former Brazilian TV actress Lu Mendonça. The cat overlords are now three. I suppose I've been invited to join real scholars on the list because my skills, acquired in a decade of technical assistance work in eastern Europe, include being able to ask faux-naïf questions like the exotic Persians and Chinese of eighteenth-century philosophical fiction. So I'm quite comfortable in the role of country-cousin blogger with a European perspective. The other specialised skill I learnt was making toasts with a moral in the course of drunken Caucasian banquets. I'm open to expenses-paid offers to retell Noah the great Armenian and Columbus, the orange, and university reform in Georgia. James Wimberley's occasional publications on the web

50 thoughts on “Bad choices”

  1. Oh James. You are welcome to believe what you like, but you should be honest, consistent, and logical in your beliefs.

    Is the REAL problem oil, or is the REAL problem population? And if it’s population then
    – are you willing to condemn Romney for having more than two kids (and Obama for having two — right now IMHO the moral choice is zero or, if you have to be an egotist, one)
    Rice, FWIW also has two kids.
    – would you be this upset if she owned stock in a company dedicated to increasing the world population — perhaps a fertility clinic?

    Personally I’d condemn her more for the two kids than the stock purchase. The two kids represents something about the world she can actually control; the stock purchase is nothing more than an admission that the world is populated by idiots, it’s working hard to destroy itself, and the purchaser has no reason not to use her intelligence to ride out the disaster in better rather than worse condition.

    Until you are willing to deal with the REAL problem — straight-up condemnation of people having more than one kid — then all this “greener than thou” is just prancing and preening.

    1. Something that I have been curious about. Has Al Gore ever been asked about his four kids? At the time that he was starting his family “Stop at Two” was a common bumper sticker sentiment. He seems to have stopped when he got a boy. I am ok with people not being totally consistent but I am troubled that he has never, to my knowledge, been asked about it.

    2. Two children is below replacement rate, which is 2.1 or something because of deaths in childhood. I don´t see anything to criticise Rice or Obama for here. Having 5 children would be a serious worry in a candidate for running the World Bank. (Disclosure: I have 3 children by my first wife. But my second wife has no children and won´t have any. So the 3 of us had one child on average, same as Obama and Rice.)

      1. Who said that the goal is replacement? The goal is DRAMATIC REDUCTION.
        The only reason we have got to where we are today is because we are (more or less literally) burning up our capital.

        OK, some choices. We can
        – maintain the current population (which is ONLY possible because of massive use of fossil fuels), so that ain’t gonna last OR
        – we can reduce the population to the maximum at which we all live like peasants, in a sustainable way OR
        – we can reduce the population further, to a point at which we can all live like kings, in a sustainable way.

        I fail to see why the second choice is the moral one, while the third choice is not. And I fail to see why anyone who supports the third choice (AND lives that choice, which obviously means no kids) isn’t entitled to indeed live like a king right now today.

        (Obviously I have zero patience for people who advocate the first choice in any way. Look at the numbers. All the hippy bullshit in the world about “green” and “environment” and “sacrifice” and “sharing” won’t change them. And just as obviously I have zero patience with people who have a non-zero number of kids, but still drive cars, fly, etc, and insist that everyone else make sacrifices to support the particular tradeoff they chose.)

        1. Maynard,

          Fertility rates below replacement mean a shrinking population.

          Now, if you want to argue that 2 is too close to replacement to reduce the population quickly enough, that’s a fair position. In conjunction I’d like a proposal for handling the severe social stress a fertility rate of 1.5 or so would engender.

      2. Fertility is measured in children per woman. Men simply don’t count. If all children reached maturity, and gender selection was not an issue, two children per woman would be the replacement rate, as each woman would have, on average, one girl to replace herself. Since some children die before maturity, and since more of these are boys than girls, 2.1 children per WOMAN over a lifetime is approximately the replacement rate. This assumes, of course, zero net migration, which is counterfactual in the US.

    3. I don’t agree that we need to criticize people for having too many kids. There just aren’t that many people who do it anymore, in the US anyway. Plus, maybe their kid will invent something incredibly useful, or cure a disease. I’m with the Fewer Babies, Well Fed group, but that’s for humanist/feminist reasons, not the climate. My sense is, any time women get their hands on decent health care, the number of kids goes down. The only exception is religious fundies, and for whatever reason, other than if they get government control, they aren’t that good at recruiting. So, I think this issue is best addressed in other ways than trying to browbeat random public servants. And there are lots of ways, especially for rich people, to try to reduce their carbon emissions. So.

    4. The overpopulation drops and stops in industrialized, first world, countries with educated, empowered women. This happened even in Catholic countries like Italy and Spain. (Americans can have as many kids as they want. As long as they’re well educated, the population will stop growing or drop over time.)

      You’re right that overpopulation is a huge problem, but it’s *not* the biggest problem: the biggest problem is climate change from burning of fossil fuels, and degradation of the ecosystems and food-production environment from pollution and shortsighted agribusiness practices like monoculture of genetically engineered grains. If we can switch from fossil fuel energy production to sustainable, renewable, green energy sources, then we might be able to educate and raise the standard of living for third-world countries enough to halt the overpopulation.

      If we can’t save the climate (coal and oil burning,) the water (fracking and ocean-killing,) and the soil (modern, soil-sterilizing, monoculture,) nothing else will matter.

      War over diminishing resources (like water and habitable land,) disease, and famine will collapse the population for us.

    5. Susan Rice not having children would not be “something about the world she can actually control”. While she may have control over it, the net effect would not even rise to the proverbial drop in the bucket.

      This is just as silly as claiming that Warren Buffet should donate more to charity rather than championing a tax code reform.

      Individual actions are no substitute for an actual policy response.

      Reduction in fertility rates happens pretty much automatically as a result of (1) the emancipation of women and (2) a rise in the wealth of a nation. Women normally have fewer children when they can choose and afford not to have children. A sensible policy is to ensure that women’s rights are respected world-wide and to improve the economic situation of developing and third-world countries, not lambasting women over whether they have children or not; in fact, such criticism, if effective, would run counter to goal (1) in that it sets an example for disempowering women by subordinating their decision to have children to the national interest.

    6. OK, I’ll bite: The REAL problem is oil. An increasing population that moves to non-fossil-fuel energy is more sustainable than a steady-state population that retains its reliance on fossil fuels.

      1. Since Maynard expressed a preference for reducing the population, I should also add that we can’t reduce the population fast enough to solve the problem without also getting off oil. At least not if we restrict ourselves to reducing the population the way it happens in Children of Men instead of the way it happens in The Last Flight of Dr. Ain.

  2. You can be pro-cleantech while simultaneously being bullish on oil. It’s all energy, and ultimately a cleantech investor wants to get to Peak Oil ASAP, since that helps drive alt-energy.

    Bill Gates and Vinod Khosla are bullish on EV’s for example. But they have also invested in a traditional engine maker (they make cleaner gas engines) in the meantime. So, it’s not necessarily a contradiction. Hell, oil companies themselves are preparing for the end. Many have cleantech investments out there. Even Dubai is in the game, trying to avoid the presumed fate of the Saudis (who once asked for compensation because of US and China alt-energy subsidies).

    1. Hmm. I think getting to Peak Oil sounds like a great way to foster more uncertainty, insecurity, and war. I think it’s a foolish and reckless strategy. It’s a bit early to be that optimistic.

      1. Peak Oil is no longer a concern in the near term. In the next ten to twenty years, the most likely thing about oil to crash is price, not production.

  3. Niceness is an overrated quality in a diplomat. But diplomacy is not. Diplomacy has no necessary connection to niceness.

    My wife taught me a wonderful lesson on how to do it. Once upon a time, we were traveling. In a Belgian train station, some hustlers started to try to put some kind of con on me. They were only half-looking at her. So she slammed them, full-on, with some heavy pointy luggage. Her fulsome apologies were perfectly calibrated to coincide with the blow. There was no doubt about her patent insincerity, or her ability to get away with it. Mildly bruised, the hustlers slunk away.

    That’s diplomacy! It wasn’t very nice.

  4. my sincerest thanks for posting this. i’d read about her iran investments, but the totality of this picture is intensely discouraging, and as you point out, disqualifying

  5. Also, if you have 25-50 million, what’s the big deal in putting 1/3rd into one sector? You can afford to lose it. And concentration is how you make a bet pay off big. Maybe thats what they wanted to do.

    1. That’s the point of the article.

      Putting 1/3rd of your investment into one sector is unbalanced, stupidly, badly-diversified, no matter how much money you have. Plus, this “sector” is not like the other sectors. This one is evil. If they wanted to make *this* bet “pay off big,” then they’re either stupid or evil.

  6. It’s going to be a tough world for politicians and bureaucrats if they have to be PC in all things including the investments they make and the number of kids they have.

    1. I did not suggest ¨all things¨. The argument would not apply to Rice becoming National Security Adviser, Director of the CIA, or Secretary of Defense. It would apply to Energy Secretary. The number-of-children thing is Maynard´s not mine, and I don´t agree with it.

  7. Yep. Huge conflict of interest. Huge. What are the rules in, say, Norway, about whether or not government officials must invest only through blind trusts?

    1. The trouble with rhetorical questions is that you can find the answer easily enough. Norway has a strong generic rule (pdf here, section 4.1) that a public official must disqualify himself (sic) from acting ¨when circumstances exist that could impair trust in his impartiality.¨

  8. It is not just going to be tough world for all of us, let alone the politicians and bureaucrats, if we keep investing in the environmentally destructive fossil-fuel economy, it will be an impossible one, but I imagine politicians like Rice can still make money from their personal portfolio, on the collapse of our world as we knew it!

    James Hansen, Director of the NASA Goddard Institute for Space Studies, made an appeal in May, 2012 to end our reliance on tar sands oil or it will be “game over” for the climate. If we continue to approve pipelines bringing in the dirtiest of fuels like tar sands he said, “there is no hope of keeping carbon concentrations below 500 p.p.m. — a level that would, as earth’s history shows, leave our children a climate system that is out of their control.” The production of tar sands oil has three times the global warming emissions as conventional oil production.

  9. The potential conflicts of interest are huge. The Tar Sands investments are troubling.

    Still, I don’t get why you’re stressing that a typical Index Fund has 10% in energy (mostly oil), as if the 3-5% you list her having in (Canadian) oil were somehow disproportionate. That seems in line with standard practice – its just that we’d hope for better.

    1. The citation claims that it´s a third of her assets tied up in Canadian oil and oil-related investments (they may be including the banks that finance oil developments), and 3-5% or so in the tar sand company Transcanada. It´s impossible to be more precise because the investments are listed in value brackets.

  10. This is indeed a massive, disqualifying, conflict of interest. Thanks for the cogent argument.

    If we have any hope of limiting global warming to a level habitable for humans, we are going to need to keep much of the already discovered and booked oil gas and coal in the ground, unused, and unburned. This would require a kind of financial sacrifice Ms Rice’s portfolio shows she would be unwilling and unable to make.

    See Mckibben’s article:

  11. My only question is, is this standard applied to other candidates for jobs? It probably should be, but this seems a little out of left field. Other than presidential candidates, I don’t usually hear much about investments. Maybe we should, but it should be done fairly.

  12. A lot of Canadian investors and investment advisors say ‘invest in oil’ because it’s not going out of fashion in a hurry, and prices are not going to drop, so it’s a pretty safe investment. US oil production that is said to be rising quickly can be funded only if prices stay very high. At lower prices, US production will not be viable.

    Canadian banks have done very well and still return 5% in dividends, not just from financing the energy sector (though they do that as they do other sectors). Compared to the US economy over the last five years or so, having money in Canada including its banks has made lots of sense.

    An argument can be made that fracking (the future of US oil and gas production, apparently) is way more harmful in the short run at least to the environment – immediate threats to drinking water, for example – so US oil investments would be no better than Canadian.

    I think Ms Rice, if made Secretary of State, should be careful about her personal commitments about oil resources given her investments, or maybe the investments should be changed in some way if she becomes SofS. But I think it’s way too purist to say that someone in her position can’t have investments in oil.

    1. I don’t think he was saying that, I think he was saying she had an unusual degree of investment in oil.

      1. I think a conservative investor in Canadian assets these days might well have 50% in oil and gas and the banks (maybe some real estate, though opinions are divided – once interest rates start rising – in this lifetime? – real estate will do less well. Certainly these days, with shaky economies all over the place, sticking to resources that everyone will always need (despite renewables, certainly for the foreseeable future – say a decade at very least – makes sense. So I don’t think her proportion of natural resources/oil and gas is disproportionate at all.

  13. We should also consider whether we wish to have a Secretary of State who is likely to recommend greater interventionism abroad, something she is liable to do, given how Rwanda formed an imprint on her in 1994, making her partial to more activism in foreign policy. She is tempted to stretch the truth on occasion, as when she advocated our involvement in Libya by asserting that the regular Libyan forces were being given Viagra in order to enable them to rape more women; recounts this episode, together with reporting that there was no evidence to support the Viagra story. To hell with what talking points she was instructed to read on the Sunday talk shows; let’s look at misleading stories of her own creation.

    If she becomes Secretary of State, we may find ourselves immersed in new foreign adventures motivated by laudable intentions alone. Susan Rice tends to see the world as a place full of loose nails which need hammering by the power of the United States. Let us think twice about whether that is what we want before cheering too loudly for her nomination. If we want to look at factors relevant to her decision-making and her actual job performance, this is the place to start.

    1. I wouldn’t make another Benghazi out of the Viagra story. It’s wrong, welcome to the fog of war and potential exaggeration.

      Rice was right to learn from Rwanda which at least benefited Egypt by somewhat-belated US intervention with the Egyptian military and assisting the successful revolution in Libya. Too bad we didn’t do more in Syria, the bloodbath there would’ve been shorter.

      The Obama Administration did screw up by over-committing in Afghanistan, but that was a locked-in promise of the 2008 campaign and might have turned out better had Karzai not stolen the presidential election. I think they’ve learned a lesson about not having troops on the ground, so I’d welcome an Secretary Rice that wanted to do something about Mali and the Horn of Africa.

      1. I’m afraid I don’t follow. Are you wanting us to put in troops in Mali now? And we should have done “more” in Syria, but gotten out of Afghanistan sooner? What is it you’re advocating?

        1. We could support the African coalition in Mali. We could’ve done a lot more in Syria short creating a no-fly zone that would’ve accelerated the situation developing to the point they’re in now, with fewer total casualties, a stronger position for the non-Salafi forces, a cultivation of an Alawite opposition, and better positioning to prevent reprisal massacres that I fear will happen. In Afghanistan we should’ve retrenched when Karzai stole the election but not pulled out entirely.

          But that’s just me.

  14. I haven’t read Susan Rice’s disclosure report but it’s entirely possible that these are her husband’s investments — he is reportedly a Canadian– I understand they met at Stanford. Let’s remember that these are human beings we are talking about before we jump to conclusions.

    1. And to be clear– the actual conflict would, I hope, be dealt with by divestiture. What would be left is the dispositional suspicion and name calling such as that in this post.

      1. I like ¨dispositional suspicion¨. But compare Ed Whitney´s dispositional evidence for Rice´s alleged gung-ho R2P interventionism and mine for her not caring about climate change. $8m in Canadian oil stocks reveals quite a lot I feel.

        I should for logical completeness have added a fourth option: Ms Rice is putty in her husband´s hands and she acquiesces passively in his financial choices. Little Wifey would also be a disqualification, but it really doesn´t fit the general account of Susan Rice, which is more Lara Croft. Or, more prosaically, Michèle Alliot-Marie and Carmé Chacón, who served successfully as French and Spanish Ministers of Defence.

  15. Susan Rice and Andrew Loomis have an extended chapter in Beyond Preemption available at . Her views on the “responsibility to protect [R2P, her acronym]” are laid out in terms that sound quite reasonable; these views focus on the role of the UN (enough to alienate the Tea Party), but they also recommend “If all else fails, the United States should establish and lead what might be dubbed a ‘coalition of the compassionate’—and be prepared to accept the consequences.” Written in the context of the genocide in Darfur, it sets her apart from the neoconservatives whose military plans are more clearly aimed at using force simply in support of “national interest,” code for the portfolios of the plutocracy. But an activist foreign policy will be the result if she is confirmed.

    It is not self-evident that this disqualifies her for Sec of State. But it should give everyone fair notice to expect a State Department with a readiness to recommend force when humanitarian crises occur abroad. She should be pressed to answer questions about when the R2P would place our military forces in action, and whether there are limits on its scope. Questions about her investments in oil should also be placed to her with demands for answers. The dumb-ass questions so far raised about her qualifications are a disgrace to the senators who asked them and to the media which did not call them out for their stupidity.

    1. R2P has a lot of reputable fans in Canada (the former Prime Minister, Paul Martin, was very keen on it, and probably still is) – so if Ms Rice has a Canadian spouse who keeps up on home affairs, and is inclined to be ‘liberal’ (much less Liberal in the Canadian party sense), a liking for such a policy might well be possible. But it certainly raises the questions that Ed W suggests. It’s a nice theory, but are you prepared to die, or send your kids and your neighbour’s kids, to die for it?

  16. I find it interesting that she is wrth a lot more than Geithner–who is in the $300k to $6M band. I remember that he got in trouble for an error in taxes, which he blamed on a mistake in using Turbotax: mistake aside, using this to do your taxes is not the mark of a very rich person.

  17. Interesting take in the Huffpost: Republicans want Obama to nominate his 2nd choice (alegedly): John Kerry. That would vacate a Senate seat in Massachussetts, and led to a special election that Scott Brown would have a decent shot at winning. Result: Republicans re-enthused, an extra Senate seat lost from a Senior Democrat and a conviction that the country is “really” behind them, just like it was in 2009.

    At the very least, Democrats should know that a Kerry nomination would probably succeed, but they need to be ready for a dogfight in Massachusetts, with no 2009 complacency.

    Up until now, I was prepared to let Rice’s investments pass as arising from mere ignorance or bad advice.

  18. I’m a total climate hawk but I can’t expect everyone to make it their top priority. I don’t believe in the mortgage interest deduction but you bet I’m using it. Maybe she thinks the same on personal investment strategy as being separate from environmental policy.

    Where I’d agree is that she needs to put her foreign holdings or all her holdings in a blind trust as a condition of becoming Secretary.

  19. I agree with JW here, but the question I have is, given her biography on wikipedia, where did she get that money to invest in the first place? Do network producers make *that* much money? Because two years (apparently) in the private sector to get the quantities we’re discussing seems impressively efficient.

    1. I should state that I don’t give a flip who Obama nominates. I just really hate it when all that’s required for service is competence + massive wealth. That cuts against somebody else too.

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