Caspian Tales: John Deuss, Oil, Spooks & Cohibas

One of my favorite stories about the rush for Caspian oil riches is the one about the man who invested $3,000 there in the 1990s and left months later with $3 million stuffed in his socks. Steve LeVine, The Wall Street Journal’s former Eurasia bureau chief, doesn’t include it in his new book, The Oil and the Glory. That tale comes via a banker I met in Baku talking about a fellow named Karlas. But LeVine does carefully frame some other Caspian treasures, aside from presenting an excellent general history of a still little-known part of the world, and he allows crucial sources to go unnamed.

Steve LeVine & his book The Oil and the Glory

LeVine’s juiciest tale is that of the Clinton administration’s hardball tactics in dealing with Dutch oil maverick John Deuss— a man I first met at the beginning of his meteoric rise in the oil business over three decades ago and who I profiled in the Bermuda press in 2004, which LeVine mentions obliquely on page 136 of his book. [See also… John Deuss - The Manhattan projects ]

John Deuss

Deuss has been in the news more recently because of the shutdown of his Caribbean bank, First Curacao International (FCIB) for carousel fraud activity. [See also…..Follow the money: the multibillion pound trail that led to Caribbean bank ]

But in the 1990s, John Deuss was still in the ascendancy. With the backing of the Sultanate of Oman, Deuss nurtured a relationship with the Kazakhs to control millions of barrels of Caspian oil—a story splashed onto the cover of the WSJ by Anne Reifenberg in 1995.

As LeVine recounts, the Clinton camp decided they had to intervene, “swayed” by Chevron’s lobbyists, the NSC and CIA that Deuss, “an independent operator”, was essentially a threat to US national security. Despite fears the move to strong-arm Deuss might somehow impact the 1996 presidential election, the Clintons dispatched Al Gore to Muscat and Moscow to discredit him (Hillary’s smearing of Bill’s women come to mind?)— with Gore subsequently being blown off by Russian premier, Viktor Chernomyrdin, a Deuss ally.

But the Clintons took it a step further. Says LeVine “. . .the administration assigned the Treasury Department to make life difficult for the Dutchman.”

In light, then, of Deuss’s current problems involving the supposed shutdown of FCIB, it is fair to ask: How much of Deuss being officially targeted again is eagerness to simply push him off the world financial stage once and for all and how much is smoke screen?

The disappointing part of LeVine’s book is that, while he tells us at fascinating length of Big Oil’s jealousy of Deuss, he does not really pursue deeper politics.

Curiously, FCIB is supposed to be in receivership. But has it shut down? A recent email to me from Steve LeVine announcing his book talk appearing on Google revealed that he’d cc’d John Deuss with the same message at FCIB.

Mystery continues to surround FCIB. We know that the crooks had their way with it, depositing a billion euros or so in VAT skimmed from the sale of mobile phones. But because of the historically tight relationship between intelligence agencies and organized crime, many speculate that FCIB, which opened in the Dutch Antilles in 1973, may have also been used partly to funnel black budget money for the CIA (one would hope without Deuss’s knowledge) and then outlived its usefulness. Perhaps along the lines of Paul Helliwell’s Castle Bank, formed in Freeport, Bahama in 1964, which Alan A. Block and Constance Weaver report in All is Clouded by Desire, was initially “placed ‘on the shelf’ for a few years, ready to be used at the appropriate moment”.

Block and Weaver also note that Helliwell was the lawyer who in 1949 “helped construct the CIA’s commercial cover organization” for Civil Air Transport (CAT) and its Southeast Asia missions. Helliwell’s firm was general counsel for the CIA front Sea Supply Corporation, which along with CAT (later part of Air America) ran weapons to the Kuomintang army in Burma, while the Kuomintang busily organized the production of opium for shipment out on CIA flights. Possibly the model for the CIA operation in Clinton-run Arkansas during the Iran-Contra years. [See also… Deeper Into The Clintons' CIA Drug Nexus & Suzan Mazur Confronts Carl Bernstein On Mena ]

LeVine does tell us that in 1993, Azerbaijan’s President Heydar Aliyev invited Iran-Contra's Richard Secord, a retired US Air Force general and covert action specialist, to Baku leading an “ad hoc squad of U.S. veterans of special forces” called Mega Oil to train and supply Azeri troops to deal with Armenia. LeVine does not remind us, however, as the late Jon Kwitny does in his book, The Crimes of Patriots, of Secord’s involvement in the CIA-linked, drug dealing Nugan Hand Bank.

Kwitny said it was Secord who introduced Bernie Houghton, “the mysterious puppetmaster of Nugan Hand”, to Edwin Wilson, the former CIA operative who went to jail in the 1980s for “betraying the U.S. arsenal to Libya”. The irony was that Wilson had been dealing with CIA-men Ted Shackley (a 1979 Deuss hiree) and Thomas Clines.

After extensive interviews for his Crimes of Patriots book and for the WSJ in Australia, where Nugan Hand was headquartered, Kwitny became convinced that Nugan Hand Bank grew out of the demise of Helliwell’s Castle Bank in the 1970s.

Nugan Hand, like FCIB, first opened its doors in 1973. Its offices were in Sydney and Hong Kong as well as in Thailand’s legendary opium center of Chiang Mai, where the bank shared a suite and a receptionist with the DEA.

For more on Nugan Hand---Jon Kwitny’s wife, the poet Wendy Kwitny , advises that her husband’s files are currently at the National Security Archive. Also, look for further revelations on Nugan Hand in Doug Valentine’s new book, The Strength of the Pack (forthcoming 2008, University of Kansas press). [See also… The CIA, Narcotics & Underworld: Doug Valentine IV ]

And for those interested in how First Curacao International Bank got its start---here's a statement from the early years, 1973-1975.

Haunting both the Deuss story and Nugan Hand story is Ted Shackley and the matter of "private sector spies". Though Deuss respected Shackley’s organizational skills, in retrospect, it was Deuss’s collaboration with the “blond ghost” that first put media bloodhounds on his trail.

In 1979, Deuss hired Shackley's political risk group— Research Associates International— to move shipments of Omani and Saudi oil to apartheid South Africa. David Corn reports in Blond Ghost that Deuss was Shackley's principal client and that they were supplying "a quarter of Pretoria's import demand".

Bruce Rappaport, Abbas Gokal and Marc Rich— later pardoned by President Bill Clinton on “trading with the enemy” charges— were also supplying Omani oil to apartheid South Africa at the time. Block and Weaver tell us they banked through the National Bank of Oman, which had a partnership with the intel/outlaw BCCI (Bank of Credit and Commerce International) and that Rappaport was a golfing buddy of CIA chief Bill Casey.

Qais Zawawi was CEO of the National Bank of Oman and Sultan Quabos's deputy prime minister of finance. He was also John Deuss's point man in Oman. Deuss later became Chairman of the Oman Oil Company, the calling card he used in his Kazakhstan dealings. Zawawi was killed on a deserted road in 1995 while riding in a car driven by Sultan Quabos, hit from the rear by a Toyota Land Cruiser--according to LeVine.

Ted Shackley knew many of the principals of Nugan Hand from his Southeast Asia war adventures. They included Nugan Hand’s legal counsel— former CIA director Bill Colby— and one of the bank’s owners, Mike Hand, who Shackley renewed his friendship with in 1979, the year he “officially” left the CIA and hooked up with Deuss.

Mike Hand was a former Green Beret and Southeast Asia CIA operative. Ted Shackley ran the undeclared wars in Laos and Cambodia and also served as CIA chief of station in the late 60s-early 70s, headquartered atop the Saigon American Embassy.

Deuss was supposedly introduced to Shackley through Michael Corrie, a Shell oil executive based in Saigon during the Vietnam War. Deuss made Corrie president of his Transworld Oil in the 1970s and his name appears as president in the autumn 1980 issue of Deuss's Chief Executive magazine as well. Long-time Deuss business associate, John Hoey, who served as a Foreign Service Officer at the Saigon American Embassy in the late 60s-early 70s, was vice-president; he is currently a Director of Tethys Oil headquartered in Sweden. Manuel (Manny) Yglesias was treasurer and Deuss's main man at First Curacao International Bank in the early years.

In Crimes of Patriots, Kwitny cites Mike Hand writing a letter to Ted Shackley in the fall of 1979 saying among other things: “If there is anything else which we may be able to exchange ideas on, or any avenues in S.E. Asia which we may be of assistance to you on, please feel free to call or write. I would be very happy to get something worthwhile going.”

We might have a more complete picture of the Deuss saga if LeVine had not allowed key Deuss associates to remain in the shadows of his Oil and the Glory book.

The LeVine book is of particular interest to me because in the 1970s, during Deuss’s phenomenal rise in the oil business, he also opened a fashion house in Manhattan called Alexandra Christie. I was the Alexandra Christie model— and later a runway model for Geoffrey Beene, Bill Blass, Giorgio Sant Angelo and other designers.

Click for big version
Caption:..Suzan Mazur with Designer Giorgio Sant Angelo (top..left) at.. Rizzoli's "Fashion as Fantasy" party, December 1975 (image, now..defunct Washington..Star)

Deuss had no knowledge I’d had a prior career as a writer/editor at Hearst magazines before arriving at Alexandra Christie and only found out when my story about him appeared in 2004 in the Bermuda press. Over tea at the Pierre Hotel several months later, I sensed that Deuss---looking elegant and relatively unchanged since I last saw him 30 some years ago---thought I’d been a plant at Alexandra Christie.

Other stories of mine have followed about Deuss and his former business associates, including names dropped from the LeVine book.

• John Deuss Oil Trader Max Bernegger Speaks
• John Deuss' Editors On Record On The Man
• Why Has John Deuss Offshore Bank Been Singled Out?
• The Rescue Of Deuss' Visionary Canterbury Tales

Although the unnamed sources are clearly a stumbling block to the book's credibility, LeVine does get in close enough to give a sense of how business got done in the Caspian of the 1990's.

He went in a bit too close in Chechnya, was seriously wounded and had to be lifted out for medical treatment. LeVine was also Danny Pearl’s roommate at one point, poignantly portrayed in the film, A Mighty Heart, trying to find Pearl following his abduction and murder. LeVine has described Pearl’s killers to me simply as “criminals”—not Islamist fundamentalists— and claimed Pearl was neither CIA nor Mossad.

Ten years ago, as the Caspian was being touted in the media for its hundreds of billions of barrels of oil, I too was bitten by the exploration bug and found myself on an Azerbaijan Airlines flight to Baku. Blankets and pillows, seemingly left over from the Nagorno-Karabakh conflict with Armenia, were the only comforts for a jolting and somewhat terrifying ride from Gatwick, with objects flying out of overhead compartments en route and a very “crude” landing. It was around the time of the First Oil celebration of the Azeri government and various international oil companies. I was seated near a USAID official, who somewhat shaken up himself, commented that AZAL was not the airline high level officials were taking to Baku.

Despite its lack of Western conveniences, I found Baku upbeat and considered moving there to produce stories for print and television. However, I soon learned about the dry wells from Art McHaffie, executive vice president for commercial operations for the Azerbaijan International Oil Company (AIOC)— a consortium of eleven different shareholders, including the Azeri government. McHaffie predicted that AIOC would probably be the only consortium operating in Azerbaijan in ten years, saying:

"I need to preface my comments by saying I'm not a geologist, but geologists I respect have made estimates of the reserves of oil, crude oil in the Caspian Sea and those reserves of petroleum can vary greatly depending on what is ultimately found by the drill bit. The estimates that I'm most familiar with and most willing to subscribe to are in the order of 2 to 3 times the North Sea. So we may be talking about 35-40 billion barrels yet to be found in the Caspian."

LeVine confirms in his book that Azerbaijan’s rich new fields never materialized, but says its proven five-billion barrel reserves are “world-class”. McHaffie said there were four-billion barrels of Azeri proven reserves and described the oil as “light low sulfur crude”, a bit lighter and with less sulfur than Arabian Gulf oil.

Former OPEC Secretary General Adnan Shihab-Eldin has said the Caspian is “expected to add 4 million barrels a day to the world supply by 2015”. This is in part due to the Baku pipeline to the Turkish Mediterranean, which began flowing last year after a bit of gnashing of teeth.

One criticism of the LeVine book has been that it does not provide the Russian perspective. So here’s a glimpse---from my December 1997 interview with principals of Russia’s leading oil and gas contractor, Rozneftegazstroy JSV, who seemed confident that wherever the new Baku pipeline route went, it would be built by them. Dr. Ivan Mazur (no relation to me), Chairman of Rozneftegazstroy JSV, and J.D. Allen, the company’s President---who confessed to smoking six Cuban Cohibas a day---told me at a meeting in London that Rozneftegazstroy was the company that knew the terrain best.

J.D. Allen (chomping on half a Cohiba): They can’t build these things without Rosneftegazstroy because Rosneftegazstroy is the only company that’s ever built in this area before. It has all the equipment. In other words, another company would have to buy billions of dollars worth of equipment, transfer it to Russia, then it still doesn’t have the expertise. All the records from the geological sight, seismic activity and everything else. Where the building and the problems are. So they have a tender but the tender— they can’t do it without Rosneftegazstroy.

Ivan Mazur: Let’s finish talking about Azerbaijan. . . . Now to bring in the early oil which should go in May next year we have to build a pipeline going through Chechnya. It costs 150 million USD. That will guarantee that the oil will go fast. Russia has with Azerbaijan an agreement. In November there will be a tender. We think we will win this tender. In January we have to start and in May we have to finish. That’s four months. In this period nobody can build. . . . Only we can work. And we will build it. But the next project— these other projects— they will go a little bit further— through Georgia, through Russia there’s another one. This one needs time. . . . If the investment is going to carry on which America is giving and other countries, other investors, then in two or three years there will be very good contracts. . . .

Suzan Mazur: Did Rosneftegazstroy help build the present pipeline from Baku to Novorossisk?

J.D. Allen: One hundred percent of every pipeline.

Suzan Mazur: How’s the relationship between Russia and Azerbaijan these days?

Ivan Mazur: They’re very good at the moment. And like any president that respects himself, he [President Aliyev of Azerbaijan] doesn’t want to depend on one person. That’s why Aliyev, as a Caucasian, he’s friends with Clinton and he’s friends with Yeltsin. So that’s why it was decided to have two pipelines— one that the Americans wish through Georgia and the other that Russia wishes through Russia. That’s all. It can’t not be friends with America. Of course, it doesn’t quite agree, but we cannot give them as much money as America is giving.

Suzan Mazur: Are the old days over completely? Does everyone just want to concentrate on making a better society and make money? Respecting borders?

Ivan Mazur: Same as Iran, for instance. Americans don’t like what’s happening, but we— with the French— are going to work with Iran. Because there’s good business there. That’s politics. Economics and politics are one and the same thing.

Suzan Mazur: But the old days are over. People respecting borders. Right? Russia’s interest now is to make money. And to bring up the society, etc. No more wars.

Ivan Mazur: There’s no difference between America, England and Russia. The only thing that one has to strive for is to become a civilized country, integrate all our companies into the international standards. . . . integrate into the world economy. Quietly, in a small way, we’ll take our place. A country like Russia will say its piece.

Suzan Mazur: And who do you think is next in line after Yeltsin?

Ivan Mazur: This is my own personal view. I’m winning a bet from J.D. Allen. I won $10,000 because I said Yeltsin would win. I won $10,000 because I knew Clinton would come in. And he [J.D. Allen] was saying not Clinton and not Yeltsin. And now let me prognosticate further. . . .

Yeltsin is in good form now. And, if he keeps to that form, we’ll have positive movements ahead, going forward. And this will come about because there’s a good chance in the government now. [Anatoly] Chubais and others they know how to do this. And Chernomyrdin with his experience. Our people are used to the fact that Tsar should be there for a long time.

But the failure to make new finds in Azerbaijan following First Oil dimmed the bright lights in Baku for a while. Word got out about the failed new wells. As LeVine describes it, there was an “outpouring of recriminations” by academics at Princeton, Rice and London’s Institute for International Studies. The Caspian was now a “petroleum white elephant” and Washington was accused of “grossly inflating the region’s estimated oil reserves for political purposes”. US Energy Secretary Federico Pena, who I interviewed in Baku, resigned “to spend time with his family”.

Then, in 1999, Caspian investors were reinvigorated by the promise of Kasakh oil reserves. People like peak oil guru, Alastair Campbell, are not impressed. Campbell has said at a J P Morgan peak oil telephone conference held for its clients that the “Kashagan field in the Kazakhstan sector of the Caspian will produce 10-15 billion barrels. . . not what was hoped for.” [See also… Peak Oil - Debate Or Vendetta? ]

The other oil maverick LeVine highlights in the book is Jim Giffen, an American who advised the Khazakhstan government and has been fighting a bribery case. Giffen is accused of taking money from US oil companies and depositing funds in a Swiss bank account, with some of the money going to Khazakhstan’s head of state, Nursultan Nazarbayev. So far Giffen’s plea that he was working in some capacity for the CIA in his dealings with Khazakhstan has bought him time in the courts.

In 1998, the Canadian Broadcasting Corporation televised one of my reports about Azerbaijan's oil women. I would like to have read more from Steve LeVine about the critical role Caspian women---first trained by the Soviets---have played in the oil economy, even though Caspian women face a smoke-filled glass ceiling as long as Cuban Cohibas rule the board.

Suzan Mazur has traveled widely as a journalist. Her reports have appeared in the Financial Times, Economist, Forbes, Newsday, Philadelphia Inquirer, Archaeology, Connoisseur, CounterPunch and Progressive Review, among others, as well as on PBS, CBC and MBC. She has been a guest on McLaughlin, Charlie Rose and various Fox Television News programs. Email: sznmzr@aol.com

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