The Reminiscences of James H. Giffen

Interviewer: George Gavrilis
Interviewee: James H.
Location: New York, NY


James H. Giffen (1941 – 2022) was a U.S. businessman and expert on U.S.-Soviet trade. He taught at the Harriman Institute for ten years.

Abstract: Giffen was a U.S. businessman and expert on U.S.-Soviet trade. He was a founder and chairman of Mercator Corporation, which represented Kazakhstan in its negotiations with U.S. oil companies, and a close friend and counselor to Kazakhstan’s former president Nurlstan Nazarbayev. Giffen was the central figure in Kazakhgate, a multimillion-dollar bribery scandal, with legal proceedings brought against him by the U.S. government. After seven years, a judge dropped the case against him after deciding he had acted with CIA approval. In the following transcript Giffen discusses his background; his entry into the field of U.S.-Soviet trade; the development of the Kazakh oil industry and the country’s trade with U.S. oil companies; the evolution of his relationship with Nazarbayev and other Kazakh authorities; the legal proceedings against him; his relationship with Gorbachev and Yeltsin; and his theories about the origins of Kazakhgate.

Q: Today is May 6, 2019. And this is an interview for the Harriman Institute Oral History Program with James Giffen. James, your middle initial is H.

Giffen: James H. Giffen 

Q: What does the H. stand for?

Giffen: [00:01:08] Henry.

Q: Henry? We always love to start an oral history at the very beginning. So, why don’t you start, before we get to the work aspect of your life, by telling us a few things about where you were born, what life was like when you were a youngster around the dinner table and so on?

Giffen: [00:01:26] All right. To begin with, I was born in a town called Stockton, California, which is approximately one and a half to two hours east of San Francisco. I was born on March 22, 1941. After going through high school, I went on to Berkeley [University of California, Berkeley] for education. Before I went on to Berkeley, I basically was a typical middle-class young lad whose main interest in life was playing golf. And, I wanted at that time, I thought, to become a professional golfer, as every young golfer wants to be, and join the golf tour.  I had started playing golf at the age of nine and made the first of two holes-in-one at age twelve.  At the age of 17, I won the Stockton city junior golf championship and subsequently qualified with several other young men to represent the State of California at the US National Junior Golf Tournament in the summer of 1958.

During that period, I was lucky to meet a lot of older folks that I never would have had an opportunity to meet with if I hadn’t been on the golf course as a young man including some of the top real estate people in California at the time and a few heads of state that would come to various places in San Francisco and I was able to play golf with. However, in 1958, I went to Berkeley and was there for four years during the first two years of which, I enjoyed college life not knowing an awful lot about what I wanted to do.

In Stockton, (where I grew up) a couple lived next door to me named the McDonalds who had two sons.  The elder son was named Jack and was three years older than I was. Jack later became one of the lead business professors in the United States at Stanford University and was a great friend of Warren E. Buffett.    Jack had a building named after him at Stanford University. While he was at Stanford, I would go to Stanford and give lectures to his classes from time to time. 

His brother, Donald, was a year older than me and, when I went off to Berkeley, it was a year after he had enrolled there.  We both had decided when we first attended Berkeley that we wanted to become medical doctors (although, at the time, I didn’t have a very good idea of what a medical doctor really did, but it seemed like the thing to do). Donald went on to the University of California San Francisco medical school and then obtained a PhD.  Today, he is one of the top cancer research doctors in the world working on immunotherapy and a vaccine for cancer. He’s had quite an interesting and productive career. 

At Berkeley, however, I didn’t know what I wanted to do but because of the influence of my family, I initially planned to become a medical doctor. I took four years of pre-med courses in two years to see whether or not it was something that I wanted to do although I frankly wasn’t all that enthusiastic about it  My grades reflected my lack of interest and were not good enough to get into medical school in any case.

However, during that period of time (around 1959-1960), I met a sorority girl that lived down the street from my fraternity.  She informed me that she was from a Catholic family and that she had six sisters and one brother and that the family had recently moved to California from New York. I was rather sympathetic to her with having such a big family but she seemed like a nice young lady and we began dating. One night she informed me that her mother and father were coming to San Francisco and she thought it might be a nice idea if we took them out to dinner.

Well, I thought to myself, this poor Catholic family, I’ll treat them as well as I can. I borrowed a few dollars from some of my fraternity brothers and made a reservation at the very fancy and exclusive Blue Fox restaurant in San Francisco and told her mother and father to meet us there. I thought it would really make my girlfriend happy and perhaps impress her parents.

When I walked into the restaurant that evening and looked around to see this poor Catholic mother and father of hers, I was surprised to see that she pointed out that her mother and father were standing at the bar having a drink. Her mother, quite to the contrary to what I thought she might be, turned out to be a former dancer in the Ziegfeld Follies.  She and her sister were known as the “Preisser Sisters”. Her mother’s name was Cherry, and her mother’s sister’s name was June who my girlfriend was named after.  June Preisser had starred with Mickey Rooney in several motion pictures.

Her father, at the same time not being quite what I expected, turned out to be an executive of Interpublic McCann Erickson [The Interpublic Group of Companies, Inc.], one of the largest advertising firms in the world. His father was Harry L. Hopkins who was in the United States federal government from 1932 to approximately 1943.  Hopkins became US Secretary of Commerce under Roosevelt in 1932 and subsequently the go-between between Churchill [Sir Winston L. Spencer-Churchill], Stalin [Joseph V. Stalin] and Roosevelt [Franklin D. Roosevelt]. David and I became great friends. David Hopkins loved to play golf and frequently invited me down to his golf course in Los Angeles, which was named the Wilshire Country Club, one of the most exclusive golf clubs in California. I had quite a surprise. My views of this poor Catholic family turned out to be not exactly correct.

During the period of time that I played golf with and got to know her father (and many of his friends) David began relaying stories to me about Harry Hopkins and what was going on in the world.  The more I listened to him, the more I became interested, particularly since it was during this period of time (the early sixties) that there were so many horrifying potential incidents going on between the United States and the Soviet Union over nuclear weaponry including the shoot-down of the US U-2 spy plane and other incidents.

In approximately 1963, I decided that what I needed to do was to find a way to become involved in keeping peace in the world.  The first option I thought would be to become involved in the issue of defense and nuclear weaponry but that would mean joining the military and not being able to be in a position of doing something significant for maybe thirty or forty years. I was impatient and not willing to wait for that period of time.

The second option was to get involved in politics and become a politician.  However, I decided that the whole thought of doing what politicians had to do for so many years in keeping people on their side would not be productive toward the specific goal of working  for a rapprochement between the United States and the Soviet Union. 

And then I discovered that while there had been political discussions between the two countries and discussions on defense and military issues, the one area that there had been very little discussion was US-Soviet trade and economic relations. And, I thought to myself, well, maybe I should look into that subject.

As a result, I took a special individual research course at the UCLA [University of California, Los Angeles] law school (which I received special credit for) to write a paper entitled “The Legal Aspects of Trade with the Soviet Union.”   When I started writing  the paper, I began to realize that there were very few people that knew anything about US-Soviet trade and economic relations except for a couple of professors -  John N. Hazard at Columbia University and Harold Berman at Harvard University. 

In 1963, after I had written the paper, I realized that there had been nothing of any substance written on the subject.  Very few people knew anything about the subject, never mind the fact that  even fewer people were involved in any kind of trade with the Soviet Union from the United States.

In 1965, I graduated from law school and, upon graduation, the first thing that I did was to visit the Soviet Union. I knew that I had to go there to continue my research. I went for approximately three weeks and met with Soviet government officials and asked them as many questions as I could about the country and trade. When we would meet, we would traditionally meet in rooms that were covered with black-and-white 8x10 photos of the atrocities taking place in Vietnam. However, nobody said anything about it at the time but it was pretty obvious the message that was being sent.

When I finished the meetings in Moscow, I flew back to New York City through Paris and, while in Paris, I stopped by the Pan American office on the Champs-Elysees to get my ticket fixed. I had intended to return to Los Angeles through New York and try and see the one man and company that had been trading with the Soviets from the United States -  a company called Greg-Gary International run by an American Armenian Turk named Ara Oztemel.

As I was standing at the counter at the Pan American office, the lady behind the counter made a comment that, “Oh, I see that you’ve just come from Moscow and now you want to go to New York.”   As I confirmed that that was what I intended to do, a man standing next to me at the Pan American office said, “Oh, so you’ve been to Moscow?” And I said, “Yes. I just returned.” And then the man asked me how did I like it and I said, “Well, I thought it was very interesting”. And he asked, “What were you doing there?” And I responded that I was there doing research on a book that I was writing. And he said, “Well, what was the book on?” And I explained that it was on the legal aspects of trade with the Soviet Union.

As he was asking me these questions, I thought to myself that it was sort of peculiar that this gentleman would be asking me these questions. And I said to him ,  “By the way, are you an American?” And he responded, “Yes I am.” And I said “Have you ever been to Moscow?” And he said, “Yes, I have.” And I asked, “Have you ever done business with the Soviets?”  And he said, “Yes, I have.” And I said “You’re not Ara Oztemel, are you?” And he said, “Yes, I am.” And I responded, “What a coincidence. Mr. Oztemel, I’m just on the way to New York to try and meet with you to discuss a book that I’m writing on the legal aspects of trade with the Soviet Union”. And he said, “Well, come to New York and meet with me in the next couple of days.” “I’ll be happy to discuss the whole subject.”

I went to New York, spent a day or two with him and he requested that I remain in contact with him and that he’d be happy to supply information at my request. When I flew back to Los Angeles from New York, I didn’t need an airplane. I could have flown there by myself. I had run into the one American who had been trading with the Soviet Union with any serious degree from the United States at that time. 

When I finally returned to California, I spent the next three years drafting my textbook which I renamed, The Legal and Practical Aspects of Trade with the Soviet Union. I completed the final draft of the book in 1968.                              

I actually finished the final draft of the book on the evening of June 5, 1968. I can remember closing the binder (which was about three inches thick) containing the draft of the book and turning out the lights and thinking to myself, I’d better get some sleep because I have to get up early tomorrow morning to fly to New York to talk to the publishers.

However, when I got into bed, I turned on the television and there was  Robert F. Kennedy walking across the floor accepting congratulations from everyone after having just won the primary in California as the Democratic candidate for President of the United States.   Suddenly, shots rang out and Kennedy fell to the floor. It was a very sad event and the next day when I arrived in New York, I found that the citizens of New York were even sadder.  Long lines stretched for blocks from the church all the way uptown, three or four or five people deep.

But, during my New York visit, I did meet with the publishers who agreed to publish the book.  I also met with Oztemel and during that meeting, Oztemel asked me what I planned to do next. I had been practicing law at the time as a defense lawyer in California while I was writing the book on weekends and evenings. I said that I hoped to become involved in US-Soviet trade and economics. “Well, why don’t you come and join me here in New York and we’ll form a new company?” he said, “I’ve just formed a company called Satra Corporation, (S-A-T-R-A, for Soviet-American trade), and we’re going to become involved in more than just ores and minerals.” In fact, Satra went on to buy the rights to the Soviet movie War and Peace (the Soviet version of War and Peace) and distribute it in the United States.  Satra also did a variety of other non-mineral/ore activities.

Oztemel then suggested, “Why don’t you come and form SATRA Consultant Corporation and represent American companies in the Soviet Union?” I agreed and within a year we had over fifty clients including IBM [International Business Machines Corporation] and PepsiCo, [PepsiCo, Inc] who Oztemel had been previously working with and gotten PepsiCo involved in the Soviet Union for the first discussions on the swap of Stolichnaya Vodka and Pepsi so that hard currency could be realized by PepsiCo through sales of the Stolichnaya in the United States.

In 1968, Oztemel and I formed the SATRA Consultant Corporation, and we began taking on companies to represent them in the Soviet Union including the National Machine Tool Builders Association and a group of oilfield technology and equipment companies. The reason I became involved in the sale of oilfield equipment was that in 1969, when I was first making my trips to the Soviet Union with SATRA, I met with some people that I had been working with on my book who had ostensibly been with the KGB [Komitet Gosudarstvennoy Bezopasnosti]. When I met with them, they suggested that I should become involved in bringing oilfield technology and equipment to the Soviet Union because the future of the Soviet Union depended upon the development of the Soviet oil and gas industry. The Soviets realized that they had very little hard currency and they had very few products that could be sold on the world market for hard currency except ores and minerals and oil and gas.  I should become involved.

I explained that, well, I didn’t really want to get involved in the ore and mineral business because we had already been involved in it and I thought it would be more time-consuming than the oil and gas business. I returned from the Soviet Union and decided to form a consortium of oilfield equipment companies that would have all of the technology and equipment that was required for helping the Soviets in their oil and gas endeavors. I decided at the time not to work with an oil company because they were too big, too bureaucratic and most of them, I felt, would not be interested in getting involved with the Soviets because of negative US-Soviet political relations which would negatively affect the companies’ overall US and worldwide reputations.

As a result, I formed the “American Oil Tool Consortium” which consisted of 22 of the top oilfield equipment companies and I began meeting with the Soviet Minister of Petroleum, Valentin D. Shashin, who I immediately became very friendly with.  Shashin was a charming man, intelligent, quiet and very professional. He explained that the American Oiltool Consortium would be able to help him in acquiring the technology and equipment that was needed for him to expand his oil production.

After several meetings with Minister Shashin in Moscow, I invited him to the United States and took him all over the country (including Alaska) meeting with various oil and gas equipment companies  as well as visiting various American oilfields. Some of our meetings were hilarious because of where they took place.  For example, some of our private meetings would take place in hotel swimming pools where we were staying at 12:00 midnight or 1:00am in the morning to get some privacy.

And, even in Alaska, we had some interesting meetings. For example, once when we were meeting in a hotel room having a confidential conversation, I suddenly looked up on the wall and noticed that the pictures were swinging back and forth and I said to myself, “What the hell is going on? How can those pictures be moving like that?”  And then I realized it was an earthquake and that in Alaska they were frequent. Minister Shashin laughed at my reaction and said, “Well, get used to it, young man. This is what happens when you visit this area of the world.”

In any case, after I brought Minister Shashin to the United States, he then reciprocated and we brought the American Oil Tool Consortium to the Soviet Union - first to Siberia and then subsequently to Baku on the Caspian Sea.  Oil had first been discovered just off of Baku in the 1800s, and had been produced in the shallow waters off of Baku since that time. During our visits to Siberia, we would fly to islands that had been built up in the middle of the flat areas of Siberia that were covered with snow in the winter.  In the summertime, the snow would melt and the entire area would be under water. As a result, the Soviets built walls around certain areas where the drilling would take place that would, in fact, be little islands in the middle of all of the water in the summer months. 

After visiting Siberia, we went to Baku on the western Caspian Sea and visited the offshore platforms which were in shallow water. The southern Caspian  has shallow water while the northern Caspian  has deeper water.  The Soviets hadn’t been able to do anything in the northern deeper water. They’d only been able to do things in the southern Caspian where the water was shallow enough so that they could build fixed platforms that would operate there. At the time, the Soviets had none of the offshore drilling vessels that were required  in either shallow or deep waters.

There are four types of basic drilling vessels. First, are jackup drilling platforms which, at the time, were used in anywhere from zero to one hundred meters of water depth. Second were semi-submersible drilling vessels which are huge three-to-five-story building structures that operate in one hundred to two hundred meters of water depth.  Third were drill ships which were used in two to three hundred meters of water depth. Finally, platforms are used in either shallow or deep water depths. The Soviets had access to none of those, so they were not able to do any work on the northern Caspian where the waters were deeper.

In any case, we began selling oilfield equipment to the Soviets and in my subsequent discussions with Minister of Oil Shashin, we decided that what we would try and do was to help him get the capability to drill in the deeper waters. As a result, between 1974 and 1976, we negotiated the sale of a semi-submersible drilling vessel which was named the “Caspmorneft” and later became under the control of the Azerbaijanis. At the time, it was designed to drill in 100-200 meters of water in the northern Caspian. The trick was how to get a vessel like that into the Caspian. It wasn’t easy.

The second problem was not just getting it into the Caspian Sea but how to finance the sales transaction because the vessel at that time was going to cost a relatively large amount of hard currency. In fact, it turned out costing just under $50 million and the Soviets didn’t have the hard currency to pay for it. As a result, I decided to have the hull of the vessel built in Finland by the Finnish ship building company Rauma-Repola in sections and ship the sections down the Volga and Don Rivers to the Caspian Sea area, put together at a shipyard in Astrakhan and then float it out into the Caspian Sea.

Rauma-Repola, as a Finnish company, not only had the capability of building such a vessel but Finland, at the time, had a “clearing agreement” on funds with the Soviet Union which meant that the Soviets could pay for the vessel in Russian rubles even though we would get paid in dollars. It all worked out perfectly well. On July 1, 1976, we entered into the final agreement for the sale of the semi-submersible drilling vessel for $48 million. I then subsequently sold about another $25 million worth of oilfield equipment to the Soviets in 1977.

While all of this was going on, US-Soviet trade, as a result of detenteʹ in 1972 was picking up. One of the things that had been agreed to by the Soviet government was that a World Trade Center should be built in Moscow.  I then negotiated the sale of all of the steel for the World Trade Center (which was built on the Volga River going through Moscow). The World Trade Center was built in the 1970’s and is one of the main buildings in Moscow even today.

While all of this was going on, I suddenly realized that perhaps it was time to do more than just sell oilfield technology and equipment. Perhaps it was time to bring in a major oil company to get involved in the exploration, development, production, processing and transportation of Soviet oil and gas. I decided that instead of working with one of the major oil companies, I would contact the Phillips Petroleum Company (which I had some contacts with at the time) and put Phillips together with the Armco Steel Corporation which had a division called National Supply that was the largest builder of oil rigs in the world.   By putting together the largest manufacturer of oil rigs with an international oil company, I would attempt to get the Soviets to give up access to a Soviet oilfield that we could then develop profitably.   Once the Phillips/Armco consortium was successful, other similar consortiums could be formed.  It must not be forgotten that at that point in time, investment was not allowed in the Soviet Union. Joint ventures were not allowed on the territory of the Soviet Union but perhaps agreements could be done where you could have two or three agreements packaged together. One agreement would be for supplying the technology and equipment which would then be used to produce oil and then be sold to Phillips in a separate agreement so that Phillips could then supply more technology which would produce more oil which could produce more money  It was a circular  concept and  could keep going as long as oil was produced.

Phillips agreed to the concept. We started working together in 1977 and signed initial agreements in 1978. While all of this was proceeding forward, I was coordinating very closely with the US Government trying to move toward an expansion of US-Soviet trade including contacts with Annie L. Wexler who was Assistant to  President Carter in the White House.  All appeared to be going well.

At the same time, in the late seventies, the Soviets approached me about building an electrical steel facility in the Soviet Union.  Armco was one of the originators of electrical steel technology which is very sophisticated. Electrical steels are used in a variety of different functions but it is a very high-tech product and the Soviets really did not have the technology.

So, we began working on something called the Novolipetsk Dynamo Steel Facility in approximately 1974. By December of 1979, I had put together another consortium that was made up of Armco, Nippon Steel (which was one of the licensees of Armco on electrical steels) and the General Electric Company.  


On December 17, 1979, after three years, eight months and thirteen days of negotiations, William C. Verity Jr, the chairman of Armco and I, along with E. Saito and K. Harada of Nippon Steel signed one of the largest non-commodity contracts in the history of the Soviet Union. Together with our team of over 40 Armco, Nippon Steel and General Electric technical and legal experts, we had negotiated a 23-volume, 8,000 page, $353 million contract for the sale of electrical steel technology and machinery and equipment to manufacture electrical steels at the Novolipetsk Dynamo Steel Facility. We could not have been more satisfied both for the public and private progress with the Soviets.   It was one of the largest contracts ever concluded by the Soviet Union with western companies.

However, seven days later, on December 24, 1979, the Soviet Union invaded Afghanistan. Several days after I returned to the United States, I received a call from Assistant to the President Wexler. Annie called me to discuss the situation. She asked me, rather rhetorically, how the United States should respond to the Soviet invasion of Afghanistan - knowing full well what the answer was.  I knew what the answer was.  I reluctantly said, “You’ve got to cut off all trade and economic relations with the Soviet Union”. “Well, would that mean everything?” Annie asked and I said, “Yes, Annie, that would also mean terminating the contract that I just spent four years of my life negotiating. You obviously have to slow it down or stop it but if you do stop it, I hope you’ll keep our allies in mind, and that they won’t rush in and try and take over the contract.” Annie assured me that the United States Government would do everything to prevent that from happening.  However, nine months later, the French company Cresot-Loire signed an agreement in September of 1980 taking over our contract and that was the end of that.  So much for allied cooperation.

Things were rather quiet between 1980 and 1983 although C. William Verity continued to be President of the US-USSR Trade and Economic Council. In 1973, after detente had started in 1972 between the United States and the Soviet Union, the two countries had formed the US-USSR Trade and Economic Council which was a joint venture of a sort made up of hundreds of American companies and Soviet organizations.

The objective of the US-USSR Trade and Economic Council was to promote an expansion of US-Soviet trade and economic relations. The Council had 32 Soviet directors and 32 American directors (all of the American directors were chairmen of major US corporations).  Donald M. Kendall was named American co-chairman of the Council and Vladimir S. Alkhimov, who had been formerly Deputy Minister of  the Ministry of Soviet Foreign Ttrade in charge of finance and subsequently Soviet Minister of Finance, became the Soviet co-chairman.

In 1977, Kendall was replaced by Verity, who was the Chairman of Armco.  Verity then came to me and asked me who I would recommend as being president of the Council and I recommended Michael V. Forrestal who had been a close friend and who was a partner in the prestigious law firm of Shearman and Sterling. Forrestal was the son of James V. Forrestal, and had become a naval attaché to Averell Harriman [William A. Harriman] when he was ambassador to the Soviet Union.  Subsequently, in 1960, Forrestal was named deputy director to McGeorge Bundy on the National Security Council by President John F. Kennedy.

Forrestal, at the time, knew more about the Soviet Union than almost any American that I knew. As a result, when Verity came to me and asked who I would recommend to become the new president of the Council, I suggested Forrestal.   Mike was then named in 1978 as president of the Council. However, by 1983, Verity had retired as had Forrestal.  With the decline in US-Soviet trade and economic relations, the Council wasn’t doing very well.  The Soviets then came to me and suggested that I take over as president of the Council and I accepted and said I would -  part-time.

When I became president of the Council, we needed to pick somebody to become chairman and Dwayne O. Andreas was suggested by Kendall because Andreas and Kendall were friendly and had known each other and worked together because Andreas was the chairman of ADM [Archer Daniels Midland Company], and ADM had produced sugar and other products for PepsiCo for their products. So, this was, again, friends knowing friends.


In any case, Andreas became chairman of the Council and I was president. At that point, Kendall put pressure on Andreas to fire me because Kendall and Verity didn’t get along too well together. This was, in rather crude terms, the difference between the “white-shoe crowd” which Verity was a part of with David Rockefeller and Kendall and his group of “newcomers.” 

As a result, Kendall put pressure on Dwayne to ask me to resign. I had a meeting with Dwayne in the Waldorf-Astoria in his suite, and we had a very nice lunch. And then Dwayne said to me that he thought times were changing and that perhaps I should resign and we bring in new blood, even though I’d only been in the Council for several months (although I’d worked with the Council for years).

I then said to Dwayne, (knowing full well what this was all about—it had little to do with me) “Well, Dwayne, I have the vote of the thirty-two Soviet directors and Bill Verity. What do you have?”  (there were sixty-four total directors). And he said, “Well, wait a minute.” I thought the president of the Council was an American and therefore the Americans chose the president.” And I said, no, Dwayne. The president of the Council is chosen by the entire board of directors, thirty-two Soviets and thirty-two Americans. And, as I said, I’ve got the thirty-two Soviet votes and Verity.  Dwayne then paused and said, “Well, maybe it’s not important that you leave right now. Maybe we can work together and get everything done.”  We subsequently became the best of friends and began playing golf together and enjoying life in a variety of different ways. 

In late 1984, Dwayne contacted me and said, “It’s time for me to go over to the Soviet Union and meet with the Soviet leadership.” And I said, “Yes, I agree.” And he suggested that we have a meeting with—if I could arrange a meeting with Chernenko [Konstantin U. Chernenko], who was then the head of the CPSU (Communist Party of the Soviet Union). I said, “Well, I could, Dwayne, but I think there’s somebody more important that we should meet with.” And he said, “Who?” And I said, his name is Mikhail Sergeyevich Gorbachev. I’m told by my insiders that he’s the man to look to in the future.

Dwayne said, “Well, all right. See if you can arrange a meeting.” And, as it turned out, I arranged the meeting on December 3, 1984 in Moscow at CPSU headquarters for just Dwayne and I, Gorbachev and Deputy Minister of Foreign Trade Sushkov and we began a serious discussion of an expansion of US-Soviet trade.  During this meeting we first raised the concept of joint ventures We told Gorbachev that if he really wanted to get US-Soviet trade going, maybe direct investment could not be done at the time for political reasons but perhaps joint ventures could be acceptable and that was from both the Soviet standpoint as well as from the American standpoint.

Gorbachev had some interest in the concept but very little happened. However, several weeks later, following our meeting with Gorbachev in December of 1984, Dwayne was at a party in New York and a gentleman by the name of Edgar Bronfman [Edgar M. Bronfman Sr.] came up to him. Edgar was Chairman of the Board of Seagram’s and also president of the World Jewish Congress.

He told Dwayne that he had read all the newspaper articles about Dwayne and my meeting with Gorbachev and he wanted to know if Dwayne could arrange a meeting for him to meet with Gorbachev.  Dwayne told him that he wasn’t the one that arranged the meeting, that I was the one that arranged the meeting, that he should contact me.

Nothing more was said. And then, in March of 1985, after Gorbachev had become Soviet General Secretary, I received a phone call from Bronfman’s office. (Edgar’s office was in the Seagram’s building on the 5th floor and, as it turns out, my offices were in the Seagram’s building, but on the 32nd  floor). Edgar invited me down to meet him in his office and explained that he had just become a member of the US-USSR Trade and Economic Council and that he was interested in helping US-Soviet trade with a wink and a nod. However, what he really was saying to me was that US-Soviet trade was being hampered by restrictions in general on not only exports, (the Export Administration Act of 1969 [1979]) but also imports on tariffs and as well as restraints on financing, by both the Export-Import Bank Act of 1945 and the Johnson Act, which was an act preventing private financing.

Bronfman said that US-Soviet trade could not expand, in his opinion (and he was right), unless the constraints could be removed on all four areas. In particular, the Jackson-Vanik amendment had to be removed which was tied to Jewish emigration from the Soviet Union. He told me that if I would work with him on increasing Jewish emigration, he would support and get the Jewish community to support an expansion of US-Soviet trade including the elimination of the Jackson-Vanik amendment restrictions.

We agreed. We then put together what we called the “Two-Track Solution” which basically meant that we had agreed on a series of steps that I would take with the Soviets to convince the Soviets to eliminate the restrictions on emigration and, at the same time, he would take a series of steps with respect to getting support for removal of the Jackson-Vanik amendment and other trade restrictions.

Our joint plan seemed solid and, we began   discussing it with the Soviets  in the first quarter of 1985. Discussions then went from the first quarter to the third quarter of 1985. 


Bronfman made it clear that he wanted to have a meeting in the Kremlin. I then began my discussions with my contacts in the Soviet government. In August of 1985, I received a telex from one of my Soviet contacts in Moscow saying that they were prepared to move forward with the meeting of Bronfman in the Kremlin but there had to be one more meeting with Bronfman outside of Moscow and that he was prepared (my Soviet contact was prepared) to meet in Paris the following day to discuss the concept further. This was all on a Friday evening.

I then contacted Bronfman by telephone (who was in London at the time) while we had my Soviet contact on the telex machine. Bronfman agreed that he would meet with us at 12:00 noon at Le Bourget Airport in Paris on Sunday, in two days. I told my Soviet contact on the telex to go ahead to Paris, that I would arrange a room for him at the George V Hotel and that we would have dinner the following night, Saturday night, in Paris, and then go on to the meeting with Bronfman the following day.

We hung up with Bronfman, and we got off the line on the telex and the next morning I flew to Paris, met with my Soviet contact and we had dinner together. And the next day, we went to Le Bourget Airport to a far runway at the airport. We were driven out onto the runway and got out of the car. The car drove away, and we stood there on this bright, sunny afternoon, all by ourselves, with planes landing all around us in the middle of the airport.

At exactly 12:00 noon, a private jet landed right near us. And, with that, at the same time, a helicopter landed. Bronfman got off of the helicopter and invited my Soviet contact and I onto his plane where a five-course lunch had been prepared for us. We then discussed the concept of expanding Jewish immigration and support for an expansion of US-Soviet trade. We agreed on a plan. The Soviet then got off the plane and we arranged a car for him to take him back to Paris so he could meet with the Soviet ambassador there and then return to Moscow the following day.

And, with that, Bronfman turned to me, and said, “What about you, Givinsky,” (which was my nickname from him). “What do you plan to do?” And I said, well, if you can get me a car to go to de Gaulle Airport, I’ll fly back to New York. He said, “Don’t bother. Take my jet. I’ll be in touch.” With that, he got in his helicopter and flew away. I got onto his jet. The pilot promptly asked me where I wanted to go and I asked do you know where the Westchester Airport is in New York? The pilots started laughing and said, “Yes, of course we know where that is.” I said “I’d like to go to Westchester”. And with that, the plane took off down the runway and off we went. And I was then given another five-course meal all by myself on the plane as it returned to Westchester County in New York.

The result of all of that was that the meeting was arranged in September of 1985 for Bronfman. While we never did get him a meeting with Gorbachev, we did get him a meeting with Vadim Zagladin [Vadim V. Zagladin], who was one of the top officials of the CPSU and one of my regular contacts in the CPSU. And he did get the meeting in the Kremlin. But in any case, as a result of that, Jewish emigration began to expand from the Soviet Union. And, that was the beginning of the whole cycle of getting things moving. 

That was in 1985. In 1986, I was called in by Kamentsev (who was in charge of foreign economic relations of the Soviet government) and told that the Soviets were going to move forward on what we had discussed with Gorbachev in 1984.  They were going to start considering joint ventures. Nobody had been told that in the US Government. I was asked to go back and explain it to the US Government.


I then stated that I wanted to return to our discussion about the period between 1980 and 1983.

During this difficult period, we were trying to figure out a way to get a dialogue going between the United States and the Soviet Union even in spite of what had happened in Afghanistan. As I sat at CPSU headquarters in Moscow with Zagladin and others, we were discussing the situation.  All communications by the United States government with the Soviet government had been terminated because of the Soviet move into Afghanistan. I suggested that well, maybe the way to get the discussion going is for General Secretary Andropov to write a little note on one of his books to Reagan and I would take the book to the White House and give it to them. And then, Reagan would write a little note on one of  his books, and I would bring it back to Moscow, and the discussions could begin. I then went back to Moscow and reported this to Zagladin.  Zagladin responded “We’ll be in touch with you.” and, within a couple of days, I was called back in while I was in Moscow and was told , “All right. We’ll do it but before we do it, there has to be one small “unilateral act of good faith” on behalf of the United States just to make sure that this is real.”

And I asked, “One unilateral act of good faith?”  Anything I was told.  It could be anything at all. I said, all right. I returned to Washington and I told the White House.  My White House contacts said, “All right, let us think about it.” And they came back and said, “What we’ll do is we will release the Soviet funds that we have frozen from the 1980 Moscow Olympics,” (which was about $20 million plus or minus). I was asked “Will that qualify as ‘a unilateral act of good faith’?” And I responded that I thought that might do it.

So I went back to Moscow, and I told the Soviets. “Okay, it’s agreed. The unilateral act would be acceptable”. I then contacted the White House and told them that it would be acceptable. Approximately two weeks later, a small article appeared in the New York Times, “United States Lifts Freeze on $20 million in Soviet Funds Frozen From the Olympics”. I then went back to Zagladin and said “the United States government is going to lift the freeze” and I showed him an article confirming that they were going to lift the freeze and I asked Zagladin whether everything was satisfactory so that we could get this process moving? Zagladin said “Yes, we’ll start the process going.”

I returned to Washington and explained that it looked like the situation was positive. I then returned to New York and a couple of days later received a call to return to Washington. I went back to Washington and there were all of these “Soviet experts” sitting around a table and they said, “You know, Jim, we have a message that we want you to now deliver to the Soviets.” And I said, “What was that?” And they responded, “Well, now that we have performed one ‘unilateral act of good faith’ on our part, we want the Soviets to perform one ‘unilateral act of good faith on their part’.”

And I said, “Are you out of your minds? Do you understand the definition of unilateral? Unilateral means one way”. They said, “Yes, we know, Jim, but we performed one unilateral act of good faith, and now we want them to perform one unilateral act of good faith”. And I said “I’m not going to tell them that”. They said, “You have to tell them that.” I said, ‘No, I don’t. You tell them that”. And they said, “Well, you are the conduit. You have to do what you’re told.” I said, no I don’t, and I’m not going to do it because this is not a good-faith negotiation.

And they said, “Well, all right, go back and tell the sources that you’re communicating with, go back and tell them that somebody else will be in contact with them from the United States government.” Fine. I said, that I will do. 


So, I flew back to Moscow, and I went in to CPSU headquarters and met with Zagladin.  I told him, “You know, Vadim, I think I ought to get out of this now. This really is becoming government to government. It’s official and it ought to go through official channels” Zagladin looked at me and said, “What’s going on?  Communications are fine.” I said, “Still Vadim, I don’t really think I should be doing this anymore. I think I should get out of it.”  He said, “Well, Jim, whatever you want, we’ll support you. That’s fine.” And I said, somebody from the US Government, I’m sure, will contact you. And I left.

And about two days later, I received an urgent phone call while I was still in Moscow requesting me to get my tail over to CPSU Headquarters immediately. As I walked in, there was Zagladin sitting at the table with a pen in his hand, clicking the pen against the table, just looking at me. And I said, “Good afternoon, Vadim. How are you? Is everything all right?” He said, [Imitates accent] “Jim, we got a call, the contact from the US Government.” I said, “Oh, good. Well, it seems like communications are on track.” He said [Imitates accent], “Jim, the US Government said they wanted a unilateral act of good faith on our part.” I said, “Oh. What did they ask for?” [Imitates accent] “They want the release of Scharansky (the number-one Jewish dissident in the Soviet Union). I then asked what he was going to do about it? [Imitates accent]  “Jim, this negotiation is over. This will not happen. And, Jim, you are alive today because you didn’t deliver that message.” Then he laughed. I laughed (sort of) and that was the end of that. Scharansky was not released at that time. Jewish immigration did not expand and there was no communications between Reagan and the Soviet government. 

This is what happens with bureaucracies.

And, so anyway, that was all in 1985.  In 1986, I was told by the Soviets to inform the United States Government that joint ventures were now going to be on the table. And, they announced them. A year went by, and only ten joint ventures were formed, one of which was Armand Hammer’s, who started getting back involved in US-Soviet trade. There were only about ten others, but none of them had any substance. 

In 1987, I was called in to a meeting with Gorbachev and he said to me, “You were the one that was pressing for these joint ventures but there are no substantial joint ventures that are being formed. Only about ten of them have been formed and none of them have any substance.”

And I said, yes, I know, Mr. General Secretary. I understand. And I said, but I think I’ve got a plan and a way to fix it but it’s going to require some new thinking. And he said, “What is it?” And I explained that the basic problem was that when an American or foreign company came into the Soviet Union and made an investment in a joint venture that would produce  products to be sold in the Soviet market, rubles would come back. And since there was no convertible ruble, the only thing that the American company could do would be to reinvest its ruble profits in other ventures in the Soviet Union which would make more rubles.

Furthermore, under US rules of accounting (GAAP), once an American company invested dollars in such a project, it would have to, under US accounting rules, write off the entire amount immediately because there was no way to get back the profits for the investment in dollars. As a result, no companies were willing to make major investments.  And, I said you’re not going to have any substantial joint ventures because of the accounting rules and because of the lack of convertibility of the ruble. But I said, I have a plan and I will bring it to you shortly.

When I returned to the United States, the first thing I did was to get in touch with my friend Nick Brady [Nicholas F. Brady], who was the chairman of the Dillon Read investment bank [Dillon, Read & Co. Inc.] and who later became US Secretary of Treasury.  Nick was also one of my golfing buddies. I met with Nick and said that I had a way that could help to expand US-Soviet economic relations.  I explained that a joint venture should be formed outside of the Soviet Union in a neutral country. We will include in this joint venture a consortium of American companies. In the middle of the consortium will be an oil company. And there will be five or six, (at least to begin with), industrial companies or at least non-oil companies, in the American consortium.

At the same time, the Soviets will form a consortium, a similar consortium, made up of oil, gas, and various Soviet organizations including industrial organizations. The two consortia would then enter into a joint venture outside the Soviet Union. The American oil company, in its separate joint venture with the Soviet Ministry of Petroleum, would be given a Soviet oilfield or Soviet oil project. Any of the oil that would be produced would be sold in the world market. Any of the funds that resulted from the sale of that oil in the world market would then be split up by the American oil company taking its share out and the rest of the funds in dollars being kept offshore in an account with the joint venture between the two major groups.

And, when the non-oil projects (the industrial joint ventures) in the Soviet Union produced products which were sold in the Soviet Union for rubles, they could then exchange the rubles for dollars from the group.  Even if they didn’t exchange them, the fact that they had the right to exchange them would mean they didn’t have to write off the investment under American accounting rules.  And so, in effect, the American oil company would be the heart of the whole concept providing it had an oil project that would be profitable.

After I explained the concept to Nick, he said, “Jimmy, that’s the god-damnedest thing I ever heard. Do you think it will work?”  I said, “ Hell, Nick, I don’t know. But I’ve got to get an American oil company and Exxon is too goddamn big and bureaucratic, Mobil’s having internal battles on the chairmanship, Texaco, the third largest oil company, (which doesn’t exist anymore) has had legal battles (a $14billion legal fight) and that leaves Chevron the fourth-largest US oil company. Do you know anybody at Chevron?

“Well,” he said, “I know George Keller.” [George M. Keller] I naively said, who is George Keller? “He’s the Chairman of Chevron”.  Nick then said, “I’ll be in touch with you.”  I went back to my office, and later that afternoon I got a call from Nick saying, “Okay, you and Mike Forrestal have a meeting with Keller at 12:00 noon on Friday in San Francisco.” I said, “What?”  I couldn’t believe it.   Forrestal and I got in a plane and flew to San Francisco three days later. And, of course, Forrestal, you have to remember, had previously been President of the US-USSR Trade and Economic Council under Verity. But then he had retired, and I had taken over after him. And, of course, as I stated previously, we were also friends.

Forrestal and I then flew out and met with Chevron Chairman George Keller, Deputy Chairmen Ken Derr (Kenneth T. Derr) and Dennis Bonney [J. Dennis Bonney] and their lawyer from  Pillsbury Madison [Pillsbury Madison & Sutro LLP], Al Pepin [Alfred Pepin], who was the head lawyer at Pillsbury Madison and we explained the whole concept. At the end of our meeting, after two hours and lunch, Keller said, “We’re in.”

As Forrestal and I flew back to New York that evening after having a Dewar’s or two on the plane, I looked at Forrestal and asked, “Did he say they were in?”  “Yes, James,” he said. “My God,  man. You’ve done it.”  This was in June of 1987. I put together five other companies in the group so we had a total of six companies and we began taking them to the Soviet Union several months later for discussions with their Soviet counter parts.

Those discussions went on from 1987 through 1990.  While the individual joint venture discussions with each of the industrial companies were going on, Chevron was being shown different oil projects in the Soviet Union -  most of which were dogs (bad projects) because the Soviet Minister of Petroleum did not want to give up any of his good oil and gas assets. The Minister wanted to get rid of his less profitable assets. And, so I had to go back to Gorbachev. I wrote a letter to him in 1990 and said, Mikhail Sergeyevich [Mikhail S. Gorbachev], we need a major project.

Chevron was then offered the Korolev oilfield. The Korolev oilfield was a good medium sized oil and gas field just north of Tengiz on land near the eastern Caspian Sea in the Kazakh SSR.  However, by 1990, it was pretty clear that it wasn’t big enough to do what we had in mind. And so I went back, and I pressed Gorbachev for something more. In fact, I asked him for all of the northern Caspian, (keeping my fingers crossed that I wouldn’t get myself into trouble for asking for too much). To my surprise, Chevron was then offered the Tengiz oilfield which was the sixth-largest oilfield (oil structure) in the world at the time.

The Soviets, had already spent $2 - $3 billion on trying to get it started but were having difficulties because while Tengiz oil is very high-quality oil, it also has impurities in it (hydrogen sulfide and others) which have to be taken out of the oil before it can be sold. It’s expensive to produce but because of its high quality (it was around 47°), as opposed to normal oil, which is something like 32°. 

In any case, Chevron then began negotiations on the project.  Preliminary agreements were signed in June of 1990 during the Bush/Gorbachev Summit in Washington DC, first on what I called the “accelerated economic development plan” for the Soviet Union on how they were going to get moving on overall economic development and how Tengiz was going to be part of it.  If all of this had worked, with this group of companies connected to Tengiz, multiple other groups or consortiums of companies could be formed . The long-range implications, if you were a dreamer, were better than any marijuana you can smoke. And so, we signed an agreement outlining the accelerated economic development plan and, Chevron signed the first serious agreement on Tengiz at the same ceremony at the Soviet embassy in Washington on June 2, 1990 during the second Bush-Gorbachev summit meeting in Washington.

Between the summer of 1990 and December of 1991, negotiations continued on the Tengiz project and on all of the other projects within the consortium. At the same time, in July of 1991, the START I agreement was signed in Moscow. I was the only non-government official at that signing. On the previous night, there was a dinner for President George H. W. Bush in the Kremlin with Gorbachev which I had also attended.

Interestingly, there were only sixteen members of the US delegation that were invited to the dinner because when Gorbachev had met with Bush in Washington, Bush had thrown a dinner in the White House for Gorbachev and only sixteen Soviets from the Soviet delegation were allowed to come to the dinner. Mr. and Mrs. Gorbachev were one and two and fourteen others, even though the Soviet delegation was much larger.   The Soviets were not happy.

As a result, only sixteen members of the Bush delegation were invited to the Kremlin dinner for President Bush  (including President & Mrs.Bush) except for three others—Dwayne Andreas and I along with my interpreter. When we were in the receiving line, President Bush looked up, saw Dwayne and I, and started laughing. He then said, “I just knew you two guys would find a way of getting in here.” We had to laugh, too.

The reason we received the invitations to the dinner was because when I had met with President Nazarbayev a few days earlier, I suggested to him that it would be nice if we could get an invitation to the dinner. President Nazarbayev said, “Jim, you know the problem.” I said, “Yes, I know the problem.”  It was all back to the fact that only sixteen Soviets had been invited to the White House dinner in Washington during President Gorbachev’s visit to the United States.  I then told President Nazarbayev “Well, that’s okay. If you can’t do it, you can’t do it.” He said, “No, wait a minute. I didn’t say no. I just wanted to make sure you understood the problem.”  I responded that I did and then I thanked President Nazarbayev for being open about the situation.

Two days later, while I was in my office in Moscow, my secretary came in and said, “There’s a messenger here for you.” A messenger? All right, send him in.” I said.  The messenger came in and said, “Are you James Giffen?” “Da-da-da!”  (Yes, yes, yes) I responded. Do you have any identification? In my office, I had to show my passport?  With that, he handed over invitations to the dinner for Dwayne Andreas and I (and, of course, my Soviet interpreter, David Inaishvili).  

The dinner in the Kremlin on July 30, 1991, was the last state dinner of the Soviet Union.  A few days later, I then flew down to Almaty  [Almaty, Kazakhstan] to meet with President Nazarbayev and we reviewed all of the plans for moving forward. And, of course, this was during the time in 1991, particularly in March, April, June and July that the Soviets were discussing the breakup of the Soviet Union and how the new country was going to be formed.

And we went through the whole thing with President Nazarbayev, and I asked whether I should stay until August 16 or 17? Should I stay and continue working on the projects? President Nazarbayev said, “No, Gorbachev is going on vacation. There is nothing more you can do at this time. I’ve got Yeltsin [Boris N. Yeltsin] coming down here. I’ve got to spend a weekend with him, take care of him. You go on home and come back in September. Everything is under control. We should have these agreements all signed. It looks like Tengiz is going forward. The central government is going to support it.   It is not going to be a problem. The Soviet Union is moving towards democratization with an open market economy. Nothing could be any better.” I said, “All right.”


Let me go back just to give you an idea, a little more detail about what was happening in August of 1991. Well, first off, on the afternoon of July 30, 1991, Gorbachev hosted a lunch for President Bush, Scowcroft [Brent Scowcroft], Baker [James A. Baker III] and other members of the US party. And he also invited Nazarbayev and Yeltsin. But only Nazarbayev attended. Gorbachev, Nazarbayev and Yeltsin had been in a private dinner at Gorbachev’s dacha the evening before, reaching agreement on how to reorganize the Soviet central government.

Yeltsin, I was told, had overindulged in liquid refreshments during the dinner that lubricated the discussion. A good deal of the lunch discussion involved the American Trade Consortium and the proposed Tengizchevroil joint venture. 

All three presidents (Gorbachev, Nazarbayev and Bush) pledged their support for the American Trade Consortium projects, and Bush encouraged Nazarbayev to conclude the Tengiz joint venture agreement with Chevron as quickly as possible.

And then we go to the dinner that night. In his toast to President Bush at the state dinner, Gorbachev emphasized the growing independence of the world at the time and the Soviet Union’s desire to become part of the world economic system but cautioned that a more determined reciprocal movement was needed. Still, he saluted what had been a fundamental transformation of US-Soviet relations in the interest of world peace, stability and progress. At the end of the dinner, as the official US and Soviet delegations were departing in a procession, President Nazarbayev caught my eye, smiled wryly and asked. “Were your seats okay?” What neither of us knew, what no one there could know, was that we had just attended the last state dinner in the history of the Soviet Union. Five months later, the Soviet Union would no longer exist, and Nazarbayev would be president of an independent Republic of Kazakhstan.

I met up with President Nazarbayev in Almaty, Kazakhstan several days later. We reviewed the terms of the union treaty, the status of the Tengiz negotiations and the proposal I had developed for an accelerated economic development plan for Kazakhstan. At the end of the meeting, I asked President Nazarbayev if my presence would be required in Moscow or Almaty over the next several weeks. President Nazarbayev didn’t think so. Gorbachev was off to the Crimea peninsula for a much-needed holiday in his cottage by the Black Sea. Most of the rest of the Soviet government officials would also go on vacation.

President Nazarbayev stated that Russian President Yeltsin would be visiting him in Almaty on the weekend of August 17,1991 and the new union treaty would be concluded in Moscow on Tuesday, August 20,1991. The negotiations over Tengiz would pick up again in the fall. President Nazarbayev advised me to go home, take the fishing vacation I had planned and return in September. I then flew back to New York little imagining what the following days would bring.

On the afternoon of Sunday, August 18, 1991, I was sitting in a fishing boat, anchored a few miles off the northern tip of New York’s Long Island. In the distance I could see the Montauk Point Lighthouse rising out of the blue waters. It was a warm, sunny, beautiful day. The air was still, and there were few sounds, other than the gentle motion of the waves and the occasional squawk of passing seagulls. Later in the day, bluefish and bass started heading inland in large numbers, their scales glittering in the sunlight as they leaped out of the water. I had never seen them do that before, but things were going so well at the time that I decided the fish were cooperating by trying to jump into my boat.

I spent a peaceful night in my room in the Montauk Yacht Club until a phone call the next morning woke me. It was a frantic employee at the front desk shouting that Hurricane “Bob” was hitting Long Island and everybody was evacuating. I apparently was the last person to find this out. I had not even heard about the storm because I had just returned the previous day from Moscow. I looked outside and saw rain blowing sideways while yacht club staff tried to board up the windows. No wonder the fish were in such a hurry yesterday.

As I got dressed and packed, I turned on my TV to hear unbelievable news. While Hurricane Bob was pounding Long Island, a political storm was smashing the Soviet Union. No one knew exactly what was going on, but it appeared that reactionary elements in the Soviet Union were attempting a coup against Gorbachev and had sent tanks into the streets of Moscow. Conspirators  on the right in the Soviet government had long resisted Gorbachev’s reforms, and they were particularly upset by the prospect of the greater independence of the republics.

President Nazarbayev later told me that the weekend of August 17, 1991 had been pleasant for him as well, although not entirely without difficulties. Boris Yeltsin had come to Almaty for the weekend. After Yeltsin and Nazarbayev had signed several important bilateral agreements in anticipation of the new Union agreement, Yeltsin embarked on many vodka-fueled adventures, including attempting to ride a black stallion that President Nazarbayev had given him as a gift (even though Yeltsin had never ridden a horse before) and going swimming in the icy and treacherous waters of the Talgar Gorge in the mountains of Almaty..

At their farewell lunch on Sunday, August 18, 1991, Yeltsin downed so many vodka shots that he could barely stand up. Though he was scheduled to depart at 5:00 p.m., it wasn’t until 8:00 p.m. that Yeltsin finally made it on board his plane and took off for Moscow. That turned out to be a very fortunate delay. I was told that one of the top conspirators’ first actions upon setting their own plot in motion on August 18, 1991 was to order the Soviet air defense force at the active Minsk military base in western Kazakhstan to prepare to shoot down an aircraft from Almaty at 5:00 p.m. on a flight to Moscow.

The soldiers prepared to carry out the order but when no aircraft appeared at 5:00 p.m., they stood down. They did nothing when Yeltsin’s plane flew overhead three hours later. The conspirators hadn’t said anything about an 8:00 p.m. flight. The attempted coup famously fizzled in the face of popular resistance and Yeltsin’s resolute stand outside of the Soviet parliament building known as the White House. On August 24, 1991, Gorbachev ordered all Communist Party units in the government dissolved. And a few days later, the Supreme Soviet suspended all CPSU [Communist Party of the Soviet Union] activities throughout the country. Communist rule in the Soviet Union came to an abrupt end.

I sent messages of support to Gorbachev and Nazarbayev, who had resolutely opposed the coup and succeeded in maintaining public order and calm in Kazakhstan. After the coup attempt collapsed, Nazarbayev emerged as one of the three central leaders in the political drama of the Soviet Union’s dissolution, along with Gorbachev and Yeltsin. 

Q: That’s wonderful.

Giffen: So, it all came to a collapse, started collapsing, in August of 1991. Things were a mess between September and December until the real coup took place and the split-up of the Soviet Union in December, 1991. And, I’ll just read how that took place. [Pause]

President Nazarbayev had been one of the most determined advocates of retaining the Soviet Union as a framework against instability, economic disorder and potential civil war that he feared might follow a complete breakup of the Soviet Union. However, his efforts to defend the new Union treaty were undercut when the presidents of Russia, Ukraine and Belarus met to declare the Soviet Union dissolved.

Yeltsin and the other presidents proposed that it be replaced with a commonwealth of independent states, an entity that would have no federal powers whatsoever. President Nazarbayev had to agree and opted to remove Kazakhstan from the Soviet Union as many of his advisors had long been urging. I was present at the emotional ceremonies in Almaty on December 16, 1991 when Kazakhstan formally declared independence. In the ceremony, President Nazarbayev knelt down, kissed the Kazakhstan flag and officially became the President of the new Republic of Kazakhstan. During the ceremony I sat next to, and met for the first time, a bright and personable 38-year-old Kazakh named Kazym-Zhomart Tokayev who at the time was enrolled in the diplomatic academy at the Ministry of USSR Foreign Affairs in Moscow.  Tokayev would later become Kazakhstan Minister of Foreign Affairs, Prime Minister, President of the Kazakhstan Senate and, on March 20, 2019, he would succeed President Nazarbayev as President of Kazakhstan. 

On December 22, 1991, representatives from the remaining eleven republics met to sign the Alma-Ata Protocol confirming the dissolution of the Soviet Union. And four days later Gorbachev resigned as President of the USSR, declaring the office defunct. 

Q: These networks combine and recombine?

Giffen: Yes. The bottom line is that in 1991, the whole thing dissolves.

Q: But, Jim, before you continue the timeline, I want to ask you, what were your first impressions of Nazarbayev when you met him?

Giffen: When I first met him?

Q: Yeah. What was he like?

Giffen: I met him at JFK airport in July of 1990 when he came to the United States as President of the Soviet Republic of Kazakhstan. 

In June of 1990 you’ve got the Bush-Gorbachev meeting, the signing of the accelerated economic development plan for the Soviet Union and the signing of the first Tengiz agreement. That was on, as I said, June 2, 1990.

In July, 1990, President Nazarbayev stated that he wanted to come to the United States. At the time, he knew that everything was changing and he wanted to be a part of it all. When he got off the airplane at JFK, I met him along with my translator Kyra Cheremeteva.  We meet him and drove to my house in Westchester County, New York.  While there, I drove him all around Westchester County and showed him the homes of some of the CEOs of major US corporations that might be interested in investing in Kazakhstan in order to give him an understanding of the people he might be dealing with in the future. 

Several days later, we flew out to California to meet with Chevron and then to other cities in the United States.  During those flights, I had the opportunity to introduce him to enjoying a few drinks of scotch whiskey which he seemed to enjoy.  At the same time, he would ask me 

question after question about both the United States public and private sectors.  He asked for example what the difference was between city government, county government, state government and the federal government? He asked how does it work?  Who does this, and who does that? Luckily, I was a lawyer and knew the answers to some of his questions.  Through it all, we began becoming very good friends.

Q: You’re going to talk about all the advice you gave him about state building. But I’m wondering, do you feel that that trip was formative for how he wanted to approach Kazakhstan?

Giffen: [01:53:10] It was absolutely the base on which he started building everything. And so, what had happened was that I took him to San Francisco, and then I flew him to Louisiana and then Washington where we celebrated his 50thbirthday. Oh, I didn’t tell you about his 50th birthday party.  When we hit Washington . . .

Q: Washington state or DC?

Giffen: Washington, DC. I’ve got all these stories I forget about. I’m sorry that I forget all these things.  It’s just that I’ve got so many facts that I’m trying to give you – fifty to sixty years of detailed facts.

Q: Well, let me put you at ease.  Oral history is never fully linear because our minds get triggered as we tell stories, and it connects us to things in the past. And, frankly, some things we just forget. They’re in the recesses of our mind and become welling up suddenly. So, it’s the most forgiving form of history there is. You were going to talk about Nazarbayev’s 50th birthday celebration.

Giffen: During the week of his 50th  birthday, we hit Washington with our group. During the trip, when we were traveling all over the United States, his aides were carrying these heavy suitcases that they would not check. And I looked at these suitcases and could not figure out what in the hell was in them but his aides were taking them everywhere with us. They never opened them up but they did not appear to be suitcases for their clothes.  They checked what appeared to be their regular suitcases but they wouldn’t let these special cases out of their hands.

When we were in Washington, we met together in President Nazarbayev’s hotel room.  The date was July 6, 1990 which was  President Nazarbayev’s  50th birthday (as it turned out, President Nazarbayev is eight months older than I am). 

In any case, on July 6, 1990 members of President Nazarbayev’s top team which had been traveling with us met with him in his hotel room. And they open up these suitcases which were filled full of all of this absolutely unusual fish and marinated camel and horse meats. It was difficult for an American to smell the “treats” -  never mind eat them.  Of course, the vodka made it easier to get used to the food delicacies.  

As we were celebrating his birthday and raising toasts, an aide came into the room and informed the President that he had a telephone call. The President then went into the bedroom and began talking while we continued with the vodka. 

While we were celebrating, we were all sitting on the floor around the table (as it is done in Kazakhstan) as you can see in these pictures.

Q: Right, kind of a coffee-level height table?

Giffen: [01:57:23] Yes, exactly. So, we’re all sitting there. The guy on the right (in the pictures) is one of my interpreters, Rick Spooner, who worked for me for years in our offices in Moscow and different places and Alma-Ati and Astana in Kazakhstan.

President Nazarbayev talked on the telephone in the bedroom for a few minutes and then came back and we continued drinking. He then looked at me and he said, “That was Mikhail Sergeyevich who wished me a happy birthday and also sent his regards.” I responded, “Well, that’s nice.” Okay. I guess that’s normal. Gorbachev had called him and somehow had gotten through to the right place, right number, and wished him a happy birthday. And of course he knew that Gorbachev and I were very close at the time. The more I think about these events, the more I laugh about them.

So, anyway, President Nazarbayev and I became great friends during this period of time. And again, this was  1990.  President Nazarbayev then stated that he wanted me to come back down to Kazakhstan as soon as I returned to the Soviet Union which was two or three weeks later. When I arrived in Kazakhstan (Almaty, then Alma-Ata), I received an invitation to visit President Nazarbayev at one of his dachas. President Nazarbayev sent a car, picks me up along with Ed Scott from Chevron and Rick Spooner and  takes us to another location where we meet with President Nazarbayev.

We went with President Nazarbayev to his dacha outside of Alma-Ata and spent two days there.  We went fishing while we were there but we had to be careful while we were there because if you fell into the water, the fish would eat you alive.  We just had one hell of a time with the President.  That was in July or August of 1990.

I then started visiting Kazakhstan regularly when I would go to Moscow where my offices were at the time.  When I was in Kazakhstan, I always stayed at one hotel that was somewhat up to western standards but wasn’t great. And then when I started working regularly in Kazakhstan, Kazakhstan Prime Minister Balgimbayev got a house up in the mountains overlooking all of Almaty. Right next to Balgimbayev’s house was another house that was given to me.

There was a huge wall around one foot thick around each of the houses.  However, Balgimbaev had carved a hole in the wall between our two houses and had put a door in the wall so that I could go back and forth between his house and my house and nobody would know about it. Balgimbaev had a terrace on the north side of his house and my house was on the south side of his house.  As a result, you could not see anything on his terrace from my house.

Once, when I brought representatives of the American Trade Consortium to my house for a meeting, I slipped out of the meeting, went through the gate in the wall to meet Balgimbayev .  Meanwhile, the oil tool representatives were up at my house saying, “By the way, where’s Jim? Where the hell is he?” And my people would say, “Go out to the pool and have a drink and don’t worry about it.” Well, where is he?  After all, we all had come up here. 

They were then told I was with the Prime Minister.  Leave him alone. And of course, when I was  with the Prime Minister, we weren’t just talking business.  We were also talking about social issues while sitting on the terrace. I had a drink and then I briefed him on what was going on with the oil projects. He asked, “How was it going with the American companies?” I responded that they wanted to know how much one project was going to cost them in upfront fees to the Republic.  I explained that one company wanted to pay $140 million, and Balgimbayev asked, “Well, how much are will you settle for?”  I told him that at the time, $190 million. So we’re $50 million apart."

Balgimbaev then asked, “So, what are you going to do when you go back and talk to them? Are you going to reduce the price?” And I said, “No, I’m going to increase it to $230 million.”  He said, “$230 million? How did you come to $230 million?” I said, “Oh, I just woke up in the middle of the night and I thought $230 million was a nice number.  I’m going to tell them you raised the price”.  Balgimbaev started laughing.  He said, “Get out of here. Go do it.” This was the way the conversations were going. It was so flippant, what we were doing, and the amounts of money we were throwing around. But we had absolute control because of the world energy situation and the value of the Kazakhstan oil and gas properties.

Some of the oil companies were used to sticking it up everybody’s ass and lying to them and acquiring prospects at their price.  Now, for once, Kazakhstan sat in the power seat and could stick the price back to them. And so, when we did make the counter offer on this deal, and I raised the price by $50 million, they claimed that they were going to pull out. However, the next morning when I woke up back in my hotel room, I opened up the door and there was an envelope under the door. I opened the envelope and there was a memorandum saying that the CEO of the American company we were negotiating with had called from the United States and stated that they would accept the offer. No more increases, please. That worked. But this is the way the negotiations were conducted at the time.

Now, it wasn’t quite as casual as all that. When I’d come up with these numbers, I had my financial team carefully run the numbers.  We knew, because the oil companies would run the numbers carefully themselves and make certain questionable assumptions that would lower the value of projects under negotiation. It was normal. I would ask for the oil companies assumptions. What are you projecting the oil price to be? What? You’re projecting it at what? You are saying the price of oil will decrease over the next forty years?

And they would do that to drive down the value so that they would have to pay less. And you would have to get into excruciating detail of all the assumptions because a low projected future oil price would be in their interest.  And, if you were dumb enough not to do a professional analysis, then you were dumb enough to get it up the rear end. The oil companies would do that to governments all the time, and they did it to the Middle Eastern governments and all the rest.   I put my foot down and said that wasn’t going to happen here. I’m going to give first class professional service to President Nazarbayev and Kazakhstan that they need. That doesn’t mean that I didn’t know that there were things going on every which way, or that a $100 million here or $50 million there or even $1billion—when it got into the billion numbers, that sort of bothered me when I found out a billion dollars was missing. [Laughs] That stuff did not go on there.

But when you were negotiating, it was going to be straight. Two plus two equals four, guys. Now, we can have honest disagreements about what’s going on. For example, what should their calculated return be? Should it be normal? What is an acceptable rate of return?  In the United States, it’s about six to seven percent on most projects. Certain kinds of projects require a ten percent projected return. Other projects might require a ten-twelve percent returns. The same projects overseas might require a fifteen percent return. Other overseas projects might require a return of eighteen percent or higher. 

But there are a million factors that go into these calculations. You have no idea. For example, it took us four years to negotiate the agreement for the exploration and development of the Kazakhstan sector of the Caspian Sea. The agreement on the offshore Caspian is the most complicated oil contract ever negotiated. You show me one oil company that’ll tell you anything different.  It is a $400 billion project. There is nothing like it. It is probably the largest private sector industrial project in the history of mankind. The final agreement has multiple formulas that come into play depending upon what happens. The oil companies all want first rights to revenues.  The oil companies want to get their returns as quickly as possible but at what percent of every dollar that comes in or every hundred dollars?  How much of that is used to pay off expenses? And then, of the remaining amount, how much goes to the government and how much goes to the oil company investors and when?

Well, as to when, the amount is a factor of the present value of their returns. And that’s what gets so complicated. You have physicists that can’t figure out these issues.   The issues in these projects can be mind-blowing. With three or four financial experts, we had to go through all of the numbers and go through all of the assumptions. And then,  what happens to this and that throws this one off? And what happens here that throws this one off? It’s one thing and another.

And it gets down to things like, well, okay that’s very good. Are you going to go to the offshore Caspian? Are you going to build that? Okay, but by the way, how are you going to get the oil out? Oh, you need a pipeline. Oh, which area is that pipeline going to be in? Oh,  there’s up around through Russia into the CPC [Caspian Pipeline Consortium] to the Black Sea. Or, are you going to go south to build a new pipeline to go across the Caspian in the South to Baku in Azerbaijan and from there on to the Black sea through Georgia? Or, are you going to keep going south and try and go through Iran and into the gulf? And then, what are the costs of each one of those, and what are the risk factors? This is as complicated as it gets but this is as big as it gets. There are few private sector projects that are bigger than a $400 billion project such as the development of the Kazakhstan sector of the Caspian Sea.

I’m jumping ahead a bit. In 1990, after Nazarbayev came into power, he made his first trip to the United States with me and we go through it all. Between 1990 and the end of 1991, the Soviet Union is collapsing. As I said, during that period, I became close to President Nazarbayev. I did not have great relations with Yeltsin after I met him because I thought he was not up to the job.  I told President Nazarbayev, better that you maintain relations with Yeltsin than me. I’m not going to do that. Of course, President Nazarbayev gave Yeltsin almost every small thing he wanted. President Nazarbayev was smart and clever and he was dealing with the pressures because he knew damn good and well that at any time the threat was still the same - which is still the threat today (which many Americans don’t have a clue about including several morons in Washington) that Russia could move south. And they could do it at any time. And what would the United States do about it? 

And they don’t have to move south to Kazakhstan in general. They just have to move down south into the Caspian area of Kazakhstan and take over Tengiz, Karachaganak and the offshore Caspian oil projects -  and they end up with the fifth and the sixth largest oilfields in the world. Production could be increased.  Putin could go to President Trump and tell him that “Those three projects are only producing one million barrels a day and they should be producing two million barrels a day.  Now, what we’re going to do is we’re going to go down there and take those projects over and we’re going to protect your Americans’ interest in the projects. We’re going to take over the projects and make them produce two million barrels a day. The American companies participating in the projects are getting half of that anyway, so your half is going to double and we’re going to get the rest of it. Everybody’s going to be better off. The world’s going to be better off. So, keep your mouth shut when we go down there and take them over because after all, we discovered them. We started putting all of our money into them. They’re our projects. They’re Russian projects.” 

If you’re Russian-minded and you want to grab everything and take everything (which is the way they have thought for a thousand years) that’s what you do. And that’s what I’m watching very carefully, because at any time that could happen particularly if the price of oil increases. And, I don’t see anybody doing anything about it. Maybe, but they certainly didn’t have too much of a problem with the Russians moving into Ukraine, and that was nothing. They didn’t get anything out of Ukraine except to maintain gas sales to Ukraine and distribution of Russian gas through Ukraine in 2014.  It was both political and economic.

Q: Does Nazarbayev worry seriously about that?

Giffen: In my opinion, he does. He has worried about it from day one. He is very careful and he told me to be very careful about it. Be careful what you say and who you talk to about all this. Yes, he’s very aware of it. You watch, that’s what he’s doing. He’s maintaining the peace and stability and security of Kazakhstan because for hundreds of years the Kazakhs have been invaded. They had been invaded from the South and from other direction. Several countries have gone through and taken them over. And so, what President Nazarbayev is trying to do is to protect the integrity of the Republic of Kazakhstan.

Q: So, friends close, enemies closer?

Giffen: You’re damn right. And President Nazarbayev was that way with Gorbachev. He was that way with Yeltsin. And he has certainly been that way with Putin. That’s why they’re always smiling together and having fun together. 

Q: So, tell me about the 1990s and how the relationship developed.

Giffen: So, all of this gets to 1991 when we signed the agreements. Everything is moving with the American Trade Consortium. Everything looks fine. And then, of course, the Soviet Union collapses. President Nazarbayev then came to me and said, “Why don’t you come down and become my Counselor?” 


As Counselor to President Nazarbayev, I had to oversee the analysis and the negotiation of Kazakhstan’s major oil projects. Nobody ever printed out that was I was formally in charge because politically you couldn’t do that. For Kazakhs, it had to be the Kazakhs who were doing it. We were just advisors and consultants. But, in fact, we were responsible for negotiation of the four main projects - Tengiz, Karachaganak, Kashagan and the CPC pipeline.

These four projects were Kazakhstan’s main investment projects. Aside from that, there were fifteen or sixteen other oil projects that I had to work on with the Kazakhstan Ministry of Petroleum.  We would tell them how to get things moving, how to put their proposals together and how to entice other potential foreign investment companies. We tried to get a few of them involved but I had to spend the majority of my time on getting these projects going.

At the same time, President Nazarbayev came to me and stated that we had to begin studies on the entire development of Kazakhstan.  I started putting together groups of experts that would work on several areas of the country’s development such as military, national security economic, political and social issues (education, healthcare and pensions).  

For each one of those areas of study, I put together four or five international experts and my teams of experts would meet with their counterparts in Kazakhstan which was all coordinated under President Nazarbayev by a man named Marat Tazhin. While Tazhin was the head of strategic planning for President Nazarbayev, he was more than that. He was and is one of the few insiders in Kazakhstan that has remained close to President Nazarbayev.

Marat Tazhin is a terrific man who is very smart.  I became very close to him and together we would form various groups that would work on these areas of development. The objective of these groups was to produce reports to the President on how to solve the issues in each of the development areas. 

So, everything collapses in ‘91. Is that where we’re starting out?

Q: Yes.

Giffen: All right, 1991.

Q: You were starting to talk about the presidential—

Giffen: All right, so the President named me Counselor to the President, and he gave me several functions. The main function, as I start off on the oil projects, is to close up Tengiz -  get that done (which I had been working on for a number of years and, to start working on the closing up Karachaganak development with a consortium consisting of British Gas, Statoil [Equinor ASA] and ENI. 

In 1992, I started negotiating those projects working with my counterparts from the potential oil company investors.  The main Kazakhstan counterpart was the Kazakhstan Minister of Petroleum at the time - Nurlan Balgimbayev. He and I had also become very close and we began negotiating those projects in 1992 - 1993 to get them all done because the Soviet Union had fallen apart in December of 1991 and Kazakhstan received its (theoretical) independence at that time.

In 1992, President Nazarbayev then also asked me, “What are you doing in the Caspian Sea?” I responded “What do you mean what am I doing in the Caspian? I’m not doing a goddamn thing in the Caspian Sea”. And he said, “Well, we should get started on it.” I said “We don’t know a thing about the Caspian Sea. Are you kidding me? That’s offshore.” All there was was some satellite imagery and some initial research (seismic work) that had been done by the Soviets that was very crude.  We just did not know what was there if anything. President Nazarbayev then said, “Well, get busy.” And I responded, “ Nursultan, please, we’re so busy with these other two projects.” “Get busy” he said.  What could I say except “Okay, I got it.”

So, that’s when it was decided in 1992 to put together a consortium so that they could share the risks and the costs. The whole idea was that in return for putting together a complete seismic study (the Exploration Research Study or ERS) each one of the companies in the consortium would be given the right to pick two five-hundred kilometer square blocks for their own use.   The companies in the consortium subsequently decided to work together and to pool their interests.

They then began the ERS in 1994 which was completed in 1996.  In the meantime, we were negotiating the contract for the offshore Caspian which, as I told you, turned out to be the most detailed, difficult contract ever written for any oilfield exploration and development project. And, of course, as it turned out, it’s one of the largest private sector industrial project in the world.

While all of that was going on in 1994-1996 with the offshore Caspian, the deal on Tengiz was closed with Chevron and Chevron started executing the project. At the same time, we were continuing the negotiations on Karachaganak. In 1997, we concluded the negotiations on both the offshore Caspian and Karachaganak projects and contracts were signed at the US State Department in Washington, DC on November 18, 1997. As a result, in addition to the Tengiz projects, we had two different consortia working on these two different projects.

At the same time, I was also working on the Caspian pipeline negotiations because there was no way to get the oil out of Kazakhstan (Kazakhstan is landlocked) except if you sold it to Russia. The Russians had control and, as a result, the Kazakhs were getting an abysmally small return on all their projects after they paid off the Russians and everybody else. But we finally got the pipeline agreed to and built because we included the Russians in the project by giving them a percentage of it (ever mind the payments I theoretically didn’t know about under the table).

So, the CPC was then concluded, and we had one pipeline in place when I was given instructions by President Nazarbayev to identify and build another pipeline on a different route. We began an investigation and initial discussions on going south and then across the Caspian sea to Baku and from there to the Black Sea through Georgia and a second route south all the way to the Gulf.  Negotiations continued on those projects through approximately 2000 when things started to go awry.

At the time, Tengiz was producing (although slowly) when the ERS (on the offshore) was completed with positive seismic results. And then the offshore consortium started drilling the first well that eventually came back positive. 

In the late 1990’s, the President began pushing me to also do other projects including putting various studies together with the other working groups.  We put together approximately 40 reports on those studies. 

We had groups traveling back and forth between the United States and Kazakhstan for several years. For example, the military group would go to meetings at the Pentagon with the Kazakhstan national security people. As it turns out, of all of those reports, the most complicated and the most difficult were the pension reports because pension programs are so complicated. Putting those reports together just drove us crazy.

So, we had these dual responsibilities. We had to analyze, negotiate and close the major oil projects while, at the same time, we had to put together the working groups for military, national security, economic and social issues. I had a third function as Counselor to President Nazarbayev - special assignments which was doing things like putting together Kazakh-US policy position papers, putting together analysis on public and private sector funding for Kazakhstan because it was always low on cash and other issues. 

For example, one of the transaction structures that we had proposed in 1992 and again in 1994 was the so-called Mexican Pemex financial transaction [Petróleos Mexicanos]. It was a transaction where, in simple terms, you pledge the future profits from oil projects to a bank which they use as security for a loan that they give you today. It sounds simple, but it isn’t quite that simple.  The Kazakhs did not go forward with the concept through 2000 but they eventually did shortly thereafter. The concept was set out in one of our reports to President Nazarbayev called “An Asset-Backed Receivable Master Trust”.  The concept is a way for governments to realize substantial short-term capital inflows. One of the key issues that Kazakhstan always had and still has today is a shortage of cash.

One of the other concepts that I suggested to President Nazarbayev was to put together a national fund. I submitted several memorandums on the concept to President Nazarbayev. Following the Norwegian example, the Kazakhstan government eventually did put a national fund together so that they could have access to funds in emergency situations. The fund was put together and money was set aside.  The fund may have gotten as high as $70 billion at one point but I think it went down considerably after that. I haven’t been up to date on it but they’ve had to withdraw funds out as needed over the years.

All of the reports and the projects we were working on were devoted to building the country. All of our joint confidential work was moving relatively well in the 1990’s until things started to kind of go sour in several different directions. One of our problems was the Kazakhstan government bureaucracy. We were having difficulties getting the government to act quickly and efficiently.   All heads of state, of course, have that same problem. 

One of the key reports that we put together was Economic Policy Initiatives to Stimulate the Economy of the Republic of Kazakhstan.  Other reports included Strategy, National Performance & Government Organization: Some Lessons of International Experience, Kazakhstan Agenda 2000: Communications, Lobbying in Institution-Building Strategy and Plan, Economic Reform, Democratization and Government Effectiveness in the Republic of Kazakhstan

The last report was one of the key reports. It was a big book that I had all my Harvard specialists and everybody else working on - how to get the Kazakhstan government to become more efficient (and, of course, we were laughing about it as we were doing it, because we were comparing the Kazakhstan government problems to the US government.  We believed that the book should be read in Washington, not just Kazakhstan).

Q: That’s the thing, Jim, though. If Washington could stand to benefit from that kind of advice, what hope was there that it would take in Kazakhstan?

Giffen: If Kazakhstan had a benevolent dictatorship, it might have gotten done.  It gets back to what I’ve said before.  Look at the record of Lee Kuan Yew [First Prime Minister of Singapore, 1959-1990]. The only way things get done effectively is if you have a benevolent dictator who stays straight. And it’s the same today.  For example, that telephone phone call I just had a minute ago was about Mexico. I told the callers that I wasn’t going down there unless the President of Mexico wanted to get serious about this situation. If he were to get serious about the situation, he’s got to take control of it and he has to become a benevolent dictator.  He should have a small organization separate from the whole bureaucracy and adopt a specific strategic development plan, and then implement it. Those are two key requirements - a plan and implementation, a plan and implementation.

The rest is just talk. You have to have a very specific set of objectives, a strategy and an action plan.  Go back to business school. Go back to law school. These are things that are taught. Well, guess what? In my opinion, that’s what life is all about in effectively running governments. In order to do that, it takes a leader that has the desire to make progress . . .to get things done -  a leader who’s got the power and the authority to do it.

President Nazarbayev had the power and authority to do it. He had the ability to do it. Unfortunately, when I was not with him going over the development plan in its implementation and encouraging him, I would walk out of his office and there would be fifteen people outside his office all waiting to see him, all saying, “I’ve got something for you. All we need from you is this little thing, blah-blah-blah.” 

I would say, “ Nursultan, you know what they’re after. They’re after A, B, C plus D.  Even if Kazakhstan gets screwed”. And, he and I would get into big arguments sometimes. For example, we had one conflict when we were in Geneva together reviewing various projects. After reviewing the projects, with Nurtai Abykaev and Rick Spooner, the President asked if there was anything else? I responded yes, there was one other thing. And the President asked what it was. I looked at him and asked, since when did the Prime Minister have the power to write laws? He’s got more power than you do.

The President looked at me and asked “What do you mean? What are you talking about?”  And I said “What am I talking about?” I then pulled out this document and put it on the table in front of him and I said “I’m talking about this. This says that he’s changing the law which he has no right to do under the Kazakhstan Constitution.”  President Nazarbayev said, “No, he can’t be doing that”.  And I said, “Please read the document.”

President Nazarbayev then picked the document up and began reading it.  When he finished reading it, he said, “All right. Go back to your room, and write a report.  Put this all in detail.” I said, “Yes, Mr. President”. Spooner and I then left the President and Abykaev and went back down to Richard’s room to put a memorandum together.  

We started working on the memo when there was a sudden knock on the door about ten minutes later. I opened the door and there was the President and Abykaev. The President said, “Come on. Let’s go to dinner.” I said, we’re doing the report you requested. He said, forget the report. You can do that later. Let’s go have dinner. We went out together and not another word was said on the subject. The subject was completely dropped but the project went forward. Over the years, we would occasionally have disagreements like that in attempting to get projects completed.  

Q: But, Jim, before you go on, does this mean that Nazarbayev never became a benevolent dictator or that he was and he lost it?

Giffen: No, what he was doing was attempting to make progress in the development of the country while keeping his government stable.  He had to work in a complicated situation. He had the neighbor to the North (Russia) that could come down at any time. He had hungry Kazakhs everywhere that were grabbing and stealing everything and he had to keep control of them. But while a lot of the Kazakhs were hard workers, some, like in any other country were lazy and a lot  of them were stealing on the side, trying to get away with it if they could. A couple of them got caught. One of them was [Mukhtar K.] Ablyazov who left the country. And President Nazarbayev has been after Ablyazov for the last twenty-five years.

President Nazarbayev has tried to keep everybody in line and keep them moving forward. He also kept control over money (even funds that most people didn’t know about). Where did the incoming funds go? Nobody ever knew.  Every which way.  And, if you were arguing his case, he was using it to the benefit of Kazakhstan as needed. Others might argue that he was keeping it for his own personal account. 

But what he did was to use the funds the best he could to keep things under control. As I pointed out previously, the country had multiple threats.  The number one threat was the Russians moving down from the North. The second threat was an undisciplined group of 18-20 million people who would like to steal anything, grab everything and who had a history - a thousand-year history - of being in line waiting for food, and realizing that it was easier for them to get out of line and go to the back door and pay somebody off than it was to stay in line. And that isn’t his fault. That’s something that’s occurred historically over time.

And then, on top of that, you’ve got all the thieves around him in Uzbekistan and other countries. In addition, you’ve got the international investors coming in who are trying to steal from the Kazakh government like, for example, some of the oil companies.  If you looked at everything, some of the oil companies were doing - they were not being good guys. They were not being good professionals - organizations that you would be proud of in the United States. They were attempting to acquire assets in a way that was in their best interests. If I were their lawyer, I would say, “All we were doing is looking out for our best interests. Wouldn’t anybody?” And I’d say, “Yes, you have a right to on a correct legal basis.”  But then the other side has got to be intelligent enough to say no when you’re going too far.

Then it gets to be a question of what’s too far. And that’s why we had to draw guidelines up to say, all right, you, the government, are going to get 80% of the divisible income. And you, the foreign investor on these oil projects, are going to get 20%.  And yes, we agreed that you’re going to get a return of 15%-18%.  Now we get down to arguing over what are the key assumptions that you’re putting into these calculations? And all of a sudden, you find out there’s different ways, for example, a member of the offshore consortium can make money. A member of the offshore consortium could make money as a member and get its one-fifth or one-sixth share of the 20% return that’s coming out. That same company could also provide services and product to the consortium and charge three times its true value.

So, for example, instead of some cost to the consortium maybe being $200 million, in fact, it might only cost $125 million. And the other $75 million comes back to the oil company as extra profit that they can never get anyplace else if somebody is paying attention. And then, of that $75 million, how much of it do they use to pay off government officials that are ripe to accepting it to allow them to get away with it?  So, the government officials are making money from it. The oil companies (the individual oil companies) are making money from it. The provider of the services, the oilfield equipment and service companies are making money from it. And the government as a whole is making money but not as much as they should.  It’s an efficiency question, and how much you allow?

And so, in comes a guy like me who says, whoa, stop, bullshit. We’re stopping this right now, and no, you’re not going to charge that. No, you can’t do that. And then, dink-dink-dink-dink-dink, what do they do? They go right around me and try and get to the President. And, for example, in one case we had—well, not just one, but several cases we had, I told the offshore consortium, no. I’m sitting there negotiating, and I’d say, no, we’re not going to go for this.  I’m not going to accept this language the way it is.

And then, dink, dink, dink dink, dink – they would go around me to the Minister of Petroleum. Who do they meet? Minister of Petroleum Balgimbayev who says no.  He supports my position.  Dink, dink, dink, dink, dink, they go around him to the Deputy Prime Minister.  The Deputy Prime Minister says no, we’re going to support the Minister of Petroleum.Dink, dink, dink, dink dink and they go around him to the Prime Minister who says we’re going to support the Deputy Prime Minister. Dink, dink, dink, dink, dink, around him to the President. Suddenly, the top officers of the oil companies are meeting with the President - except I’m sitting there also. 

I would say, “Welcome, gentlemen. Don’t bother going through an explanation of what you’ve got in your memorandums. As Counselor to the President and a lawyer, I’ve already explained it all to him. He knows it all. He’s ready. Now, cut through the bullshit. You’ve got 20 minutes. What’s your argument? Go ahead. While I didn’t say it in these words, that was in effect what would happen. The officers of the companies would then be very polite and nice but they would try and have meetings without me present. They would attempt to go around us all the time. And sometimes they were successful, and sometimes they were not. There was nothing I could do about it. You do your best. Sometimes I would say to the President  “Nursultan, you can not do this.  There’s more to this than you know.” “Okay,” he would reply. 

It’s complicated. There are a hundred issues that come to play in any given negotiation and I didn’t have all the answers. Nobody had all the answers. All we could do is the best we could. So, we went through this period in the 1990’s where we were executing the—trying to close up the agreements and get them all done and at the same time, creating the strategic plans. 

Now, while all this was going on, the North Korean MiG affair occurred in March, 1999.  In March of 1999, a plane from Kazakhstan landed in Baku full of six disassembled MiGs along with aircraft technicians and, there were multiple stories that came out as to where it was going. It was going to Czechoslovakia. It was going to Yugoslavia (remember that at the time, the war was going on in Yugoslavia).

Q: In Kosovo, yeah.

Giffen: However, in Baku, it became known that the plane was actually heading to North Korea. As a result, the plane returned to Kazakhstan. Relations then deteriorated between the United States and Kazakhstan. Five months later, in August of 1999, the South Koreans raise hell that MiGs had arrived in North Korea. And then, of course, the whole affair comes out where, in fact, they say there were thirty MiGs that were delivered from Kazakhstan. With that, I’m given a US government message to deliver to President Nazarbayev to knock this off, that the United States government knows about it and that the meeting that was being planned for President Nazarbayev with President Clinton and Vice President Gore in December, 1999 was going to be off unless the deliveries to North Korea stop immediately.

I then met with President Nazarbayev and delivered the message.  The President responded to me that, “We’re not doing it.” I said, “Okay, fine. You’re not doing it”. But then the President announced the firing of Abykaev, who was the one who was charged with all this. Abykaev is charged along with the Minister of Defense and they are removed from the Kazakhstan  government at least temporarily. And, so they’re out, and hopefully this whole affair is behind us. There’s not going to be any more MiGs or A5 and A6 missiles sent to North Korea. And, the meeting with President Clinton goes forward in December, 1999 as planned. During President Nazarbayev’s visit to the United States, we held a big dinner in New York and Robert Strauss acted as the host of the dinner.   And there’s about, I don’t know, two or three hundred people who attend.  After that, there were meetings in Washington. But things stay sour. 


Where did I leave off?

Q: You had left off with some of your concerns about the oilfields not producing enough, the company shenanigans, warning Nazarbayev.

Giffen: [02:53:27] So, what basically happened was that, in 1999 and 2000 it was pretty clear that the oil companies were not properly executing the agreements. And, they started hemming and hawing about, for example, on the offshore Caspian, when first oil was going to be produced. It was supposed to be produced in 2004 latest 2005. And then they started saying 2006 , then 2008 and then 2010. And, as it turned out, it wasn’t until 2016. So, they were eleven years late on first oil alone from the offshore Caspian Sea. This is on the offshore Caspian only.

On Tengiz and Karachaganak, they were somewhat better but still maybe 20% below what they should have been. On Tengiz, they were on track but slow. Chevron’s argument was that it was because of normal technical encounters that they have on a project of this sort. But otherwise, everything was operating smoothly. However, it probably had to do with the financial exposure of Chevron and how much investment they had and trying to get as much of their money back as soon as they could so that the project could become a cash cow, so to speak, and they would have little or no financial risk.   And if there is a threat, like the Soviets moving into Ukraine, moving south, then at least they’ve got their investment out of it as much as possible.  And so, all of this was going on.

Meanwhile, I’m raising hell about the whole damn thing with the oil companies. Then, when Cheney becomes Vice President, the oil companies begin secretly meeting with him. I don’t know if you recall these meetings, but Cheney held them when he first came into office.  He started holding meetings on creating an energy policy. At the time, I was putting more pressure on the companies and the government.  The delays had to stop.  I told the President that Kazakhstan had to put its foot down on the poor implementation to make sure the key output  projects were implemented correctly because the time value of money was just going to kill the returns to the government.

At the same time all this was going on, in 1998, the President and former Prime Minister Kazhegeldin got into a tiff.  Kazhegeldin left the country.  When he left, the Kazakhs began taking actions against him in Belgium where he had some money tucked away.   The Kazakh government brought legal actions against him.  Once they brought legal actions against him in Belgium and the Belgian investigators started getting into things, they then got in touch with the Swiss to find out if there might be any related accounts there. And, “bingo”, they found his Swiss accounts. And, the more they looked into it, they found eighteen Kazakh accounts, one of which was “Condor”[1] but all of these accounts, some of which, not all, but some of which I had signature authority on as Counselor to the President.

And, so once the Swiss became involved, a Swiss prosecutor named Judge Devaux took the whole thing up.   And, while he’s doing it, Kazhegeldin hired Rinat R. Akhmetshin, a former KGB Russian, who was living in Washington, DC and Akhmetshin and Kazhegeldin started feeding the US Government information on the Kazakhstan foreign bank accounts which for the most part, the USG did nothing about- at least during the 1999-2000 period.

Not making any progress, Judge Devaux got the bright idea that he was going to go to the United States and get the USG involved and he got on a plane and came to the US.  He then fed the US government information and the US government began getting involved. And while the US government was getting involved, all of the business about the North Korean Mig affair came out. Suddenly, Nazarbayev is not such a friend anymore to the United States but the US government can’t bring an action against him as a head of state.

But they do see that they could bring an action against the person who is the head of state’s man and name the head of state as an “unindicted co-conspirator” and then attempt to get him to do certain things that the US wanted President Nazarbayev to do (such as certain things with respect to Afghanistan from Kazakhstan and several other things which I really can’t get into). But they had to do some things that they wanted the Kazakhs to go along with including having to do with Kyrgyzstan and other things. For example, there was one former government official from another country that the US government had problems with who was being harbored in Kazakhstan and Nazarbayev eventually kicked him out and sent him to Belarus..

So, all of these activities are going on during the 2000-2002 period, and then in 2003 the US Justice Department starts the formal legal process against me and naming President Nazarbayev as an unindicted co-conspirator. 

My last meeting with President Nazarbayev was on March 21, 2003.  During that meeting, I told the President that Kazakhstan was being screwed on all three major Kazakh oil projects. In fact, from the projects, the Kazakh people should have gotten over the forty-year life of the projects (depending upon the price of oil) one trillion dollars. However, they were now going to get no better than $500 billion.  Kazakhstan was going to lose fifty percent of the calculated profit that they would have obtained over that forty-year period. Now, that money won’t go away. Those oil reserves won’t go away. They will still be there after the 40 year period of the agreements but who knows what the hell’s going to happen 30-40 years from now- whether there’s going to be the same demand for oil and what the price of oil will be.  It gets down to all kinds of sophisticated issues of  “present value” et cetera.

But, the fact is that the major Kazakhstan oil projects are today producing half of what they should be producing. And, the government is short on cash.  Some might argue that if they had the cash, it would probably be dissipated off into other people’s pockets. But the way that it works right now is that various organizations in the Kazakh government have cash. And, when cash is needed for something by the central government, the government turns to those organizations to get money back. But, now Nazarbayev is retiring (theoretically). At least he has given up the title of “President”.

And, Kazym-Zhomart Tokayev, who had been Minister of Foreign Affairs, Prime Minister and then President of the Senate is now President. 

The difference between when I was doing things there and today is that I had a certain degree of power and could get things done. But that also meant you had enemies. And that’s why, for example, I had a bodyguard that was assigned to me. And, when I would get off the plane in Kazakhstan, he was waiting at the bottom of the stairs of the plane, not waiting in the airport lounge but waiting at the plane every time. And when I would go around Kazakhstan, he was with me every minute. And when I would leave, he would go right up to the stairs of the plane  with me. His name was “Spartak” and he was one tough dedicated young man.

But, during this period of time, a couple of the people that were on the committees that we had put together on the Kazakh side were murdered—or, sorry, “committed suicide”. One of them who committed suicide was found dead on the floor of his living room. He had committed suicide, and next to him was found a pillow with bullet holes in it. He had been shot in the chest. He apparently had shot himself twice in the chest. And then he finished himself off by shooting himself in the head. And it was suicide!

Another one who was inside of our group was found dead because of a hunting accident, until a picture showed up in the newspapers of him with two of his bodyguards laying on the ground with their hands tied behind their backs, dead. They had been shot. And the man that was in charge of—that was then convicted of doing that—was the Minister of Strategy who I’d been working with who had been working with the other two guys. And so, he was put in the can. And then he eventually shot himself and died. 

And, when the legal action began against me, I received the following message from the President. You tell me what it means. “You were my friend. You are my friend. You will always be my friend. You take care of my family, and I will take care of yours.” Very friendly. You take care of my family, and I will take care of yours!

Q: It’s clear what that means.

Giffen: Yes, it’s pretty clear. Meanwhile, of course, all of my loyal comrades in the US government in Washington and in certain other places of the country went radio silent, which was normal. And I told them at the time when they called me—they called me in August of 2000, I think it was, to tell me that, after 30 years, we had to terminate all communications. I said that’s fine, but just remember that this is a two-way street as we go through all this. They didn’t say anything. That was it. But then they, of course, showed up during the confidential legal proceedings. I didn’t wave to them, but I’d look at them when they’d go in and sit in the courtroom. They were the only ones allowed in the courtroom other than people related to the proceedings.

Q: Did Nazarbayev’s message affect how you approached your trial strategy?

Giffen: No. Our strategy was simple. I just said to US government officials, you started this whole thing. I didn’t do anything to aggravate it at all. I didn’t write articles. I didn’t make any public statements or anything of that sort. I just went radio silent. 

But, the fact is that these government systems are their own worst enemies the way they do these things.  

I’d spend three weeks out of four over in the Soviet Union or Kazakhstan trying to get all this together. And we did get the three major projects going in Kazakhstan, and we did get one pipeline built but there has been no real progress on two other important pipelines. And, Kazakhstan is not producing what they should be producing. And the threat (from Russia) is still there. And that’s why, even in the text of the book I am writing, this is the way I end it.  (Giffen reads from his draft book).

“Aside from important factual misstatements and omissions in the April 2003 indictment against me, the US investigation and the legal proceedings should never have been brought for legal foreign policy and national security reasons. Policy concerns, as well as equitable concerns as considerations, argued for their termination. US Government foreign policy and national security interests were damaged, and the US Government lost a unique channel of communications sitting within the seat of power in a critical foreign government.

Indirect political and economic costs to both Kazakhstan and the United States of the US legal proceedings were enormous. If the US legal proceedings were not in the best interest of justice, or of the United States, then why did they begin? And why did they continue for over ten years? Was it a case of a lack of communications and inadequate coordination of government policy between differing US Government departments, organizations and agencies; the right hand not knowing what the left hand was doing? Or was it something else, something more troublesome than mere incompetence?

Even if other departments or agencies of the US Government were not aware of the initial interest of the US Justice Department in the Swiss investigation, they certainly became aware of the Justice Department’s own investigation when it became public in June of 2000. At that point, they certainly understood full well that the potential US legal proceedings were not only unjustified but were damaging to United States foreign policy and economic interests.

Why didn’t the other US Government departments and agencies step forward and attempt to have the legal proceedings terminated? And, if they did, why were they not successful? Was there some hidden reason for the US Government not wanting to terminate the US legal proceedings? The Kazakhstan government was cooperating with the US Government on both counter terrorism and nonproliferation issues as well as regional issues. Was the US Government using the US legal proceedings to gain leverage over the Kazakhstan government?

US oil companies were participating in all three of the major Kazakhstan oil and gas projects—Tengiz, Karachaganak and the offshore consortium developing Kashagan—in the late 1990s before the US investigation began, but only really controlled as operator one of the three projects—Tengiz. Did US oil companies want the US Government to put pressure on the Kazakhstan government to give them more control of the projects? Alternatively, were the US companies participating in the projects fearful that the Kazakhstan government would attempt to change their original favorable agreements in order to claw back a greater percentage of the profits from the projects?

Even more chilling, when my memorandum and report to President Nazarbayev”—which is the one I’ve shown you here—“exposed the potential mismanagement of the projects, which cost the people of Kazakhstan hundreds of billions of dollars, was it determined that I had to be silenced? Did the complicit US oil companies use their contacts at the very highest levels of the US Government to divert attention away from their less-than-productive efforts to develop and produce Kazakhstan’s energy resources, to silence one person who could expose what was going on?

Could the oil companies have convinced the US Government to take action against me and Kazakhstan’s highest government officials in order to avoid properly implementing the oil and gas development projects they had agreed to develop or, at minimum, to avoid responsibility for the improper implementation of the projects? It was not as if there were no communications between the US companies and the US Government, particularly during the middle of the investigation when the White House held very confidential”—read, secret—“meetings with the oil companies in 2001 to establish US energy policy.

In any case, it certainly was an unusual coincidence that the US legal proceedings against me, which named Kazakhstan’s highest government officials formally, began with my detention at John F. Kennedy Airport just one week after I had personally reported on the status of the delayed and costly implementation of the oil and gas projects to President Nazarbayev and was intending to return to Kazakhstan to address the issue further.

Interestingly, and curiously, no charges were ever brought against any of the oil companies that were the subject of the original investigation, although evidence in the possession of the US Government made it clear that most of the funds in the Kazakhstan government’s Swiss bank accounts were from the oil companies participating in two of the three major Kazakhstan oil projects—namely, the offshore Caspian and Karachaganak projects. And it would have been those oil companies that would have benefited from any illegal payments resulting in beneficial changes to the original agreements with the oil companies, if there had been any.

Was this not a prima facie clear violation of the Foreign Corrupt Practices Act? Were the participating oil companies too big, and potentially too well connected, to be indicted?” 

Is this boring you?

Q: No, not at all. I have many questions.

Giffen: All right, indicted. Let me just finish it: 

“If the US Justice Department truly believed that oil company funds were being channeled into personal accounts of Kazakhstan government officials, should it not have proceeded with charges against the oil companies as well? After all, the Justice Department did not have to prove that an oil company knew for a fact that funds were being channeled to Kazakhstan government officials. The Justice Department merely had to prove ‘conscious avoidance’ of the facts of an oil company—that is, that the oil company may not officially have known that the funds that had been transferred ostensibly to the Kazakhstan government were actually ending up under the personal control of Kazakhstan government officials. But they either intentionally or negligently avoided taking any reasonable and serious steps to find out what was happening. Did the Justice Department ‘consciously avoid’ the doctrine of ‘conscious avoidance’? If so, why?

Some have suggested that perhaps the oil companies were the ultimate target of the legal proceedings, and the strategy of the Justice Department was to bring charges only against me initially to attempt to persuade me to testify against the oil companies, a strategy that certainly had been used before by the Justice Department in other investigations. However, again, as US Attorney Preet Bharara had noted in the meeting with my lawyer William Schwartz, in November of 2009, the US Government prosecutors did not once over the ten-year investigation and legal proceedings ever ask to talk to me personally. Not once. Bharara did suggest during the November meeting with Schwartz that perhaps the Justice Department should call me in for a conversation. But nothing ever happened. Why? What were they afraid of hearing?

It was also interesting that some of the same US oil companies that were the source of the funds in the investigation made extravagant gifts to Kazakhstan government officials (gifts which the US Government knew from documents acquired from the oil companies themselves during the investigation) in clear violation of the Foreign Corrupt Practices Act which prohibits bribery in foreign commerce. But no charges were ever brought against the oil companies. Why? The oil companies built stadiums for the Kazakhs. It’s just unbelievable what they did.

I have no doubt that the American oil companies resent the Foreign Corrupt Practices Act and see it as a handicap in their efforts to do business abroad in competition with oil companies from other countries that have governments that do not prohibit gifts and bribes. For example, former Iranian Prime Minister Silvio Berlusconi—

Q: Italian. You said Iranian.

Giffen: Oh, Italian, sorry. Italian Prime Minister Silvio Berlusconi once declared that bribes were not crimes but rather commissions. Berlusconi was quoted in the Financial Times as stating that “Bribes are a phenomenon that exists, and it’s useless to deny the existence of any of those necessary situations when you’re negotiating with third world countries and regimes.” But the US Government ties to American oil companies also runs deep. President Nazarbayev was quick to point out that, “The direct interest of President George H.W. Bush and Chevron’s involvement in Kazakhstan, or Vice-President Dick Cheney’s in Conoco Phillips and Halliburton in securing the big contracts here.” (Kazakhstan) Condoleezza Rice was a member of Chevron’s board of directors until she resigned to become national security advisor and later secretary of state under President George W. Bush. Chuck Hagel was also on Chevron’s board of directors, and he became President Barack Obama’s defense secretary. And Chevron remains the largest foreign investor in Kazakhstan.

The scandal in Kazakhstan’s oil industry over the last twenty years, in my view, has as much to do with US politics as with economic corruption. The US Government, under both Republican and Democratic administrations, has pressured Kazakhstan not to take any actions against the oil companies’ massive failures on Kazakhstan’s oil projects. It’s a comfortable arrangement for the oil companies, but it has cost the citizens of Kazakhstan dearly.

Consider again the three major oil projects in Kazakhstan. As I pointed out in Chapter 29 (of my draft book) my technical and financial professionals were projecting that the Kazakhstan government should have been able to realize approximately one trillion dollars for the production of 3.9 billion tons over the life of the agreements to develop Kazakhstan’s three largest oil and gas structures—Tengiz, Karachaganak and Kashagan. Unfortunately, over the last ten years, all of the production and financial projections have deteriorated. My technical experts believe that Tengiz should have been producing almost one million barrels of oil a day. After twenty years of production, it’s producing around six hundred thousand. They also believed that Karachaganak should currently be producing over three hundred thousand barrels a day. By 2016, it was producing under two hundred fifty thousand.  And they believed that Kashagan should also be producing approximately one million barrels a day. But as of the end of 2015, it was producing nothing. Nothing! In fact, as I pointed out in chapter ten, Kashagan commercial production did not begin until 2016, a delay of eleven years from the original contractually-agreed-upon first commercial Kashagan production date of 2005. If delayed production was not bad enough, there have been substantial development and cost increases with the original development cost estimates increasing by as much as five to seven times, which directly affects the Kazakhstan government’s share of the divisible income.

The bottom line is that by 2016 these three projects alone should have been producing over two million barrels a day rather than something over eight hundred thousand barrels a day. Do the math. If the oil prices average approximately fifty dollars per barrel, every day at least sixty million dollars in project revenues are being lost from these three projects, or twenty billion dollars per year. Kazakhstan should now be one of the world’s largest exporting countries realizing billions of dollars in cash to support the development of the country.

My technical and financial professionals currently project total production from these three projects will only equal something over two billion tons over the life of the agreements with the foreign partners, approximately sixty-six percent of the 2.85 billion tons production the foreign partners have projected and a little more than fifty percent of the 3.9 billion ton production estimate my technical and financial professionals had projected.

With the actual price of oil averaging more than ninety dollars per barrel over the last ten years—2006 to 2015—the Kazakhstan government lost in excess of a hundred billion dollars of the projected potential revenue it could have received from the project during the period. Furthermore, it is projected that the Kazakhstan government will lose at least an additional four hundred billion dollars or more in revenue from the development of production of the three projects over the remaining life of the agreements with the foreign partners, resulting in a total loss over five hundred billion dollars, or fifty percent of more than one trillion dollars in revenue the government should have received from the projects, revenues that could have been used by the Kazakhstan government to develop into a more modern democratic and economically viable state.

This is not just a political and economic problem for the Kazakhstan government. It is also a national security problem. It is not too hard to imagine that Putin could argue that Russia should move into northwest Kazakhstan and properly develop Tengiz, Karachaganak, Kashagan and other Kazakhstan oil and gas structures in the region in order to support the substantial but poor Russian population in Kazakhstan. After all, the Russians could argue that all three major projects are located in northwest Kazakhstan, close to the Russian border, and were originally identified and developed by the Soviet government by former Soviet ministries consisting mostly of Russian oil and gas experts.

And development began on two of the projects, Tengiz and Karachaganak, long before Kazakhstan became an independent state and gained control over the projects. Some Russian government officials have argued that after the Ukrainian situation has been resolved, the Russian government should turn its attention into regaining control over other countries in ‘its near abroad,’ such as Kazakhstan. It has been argued that the Russian government should take back the projects and properly develop them, particularly if projected Russian oil production begins to decline and world prices remain at a level that makes production from Kazakhstan’s main oil projects attractive.

All of the elements exist for a perfect storm to take place with Russia over Kazakhstan’s major oil and gas projects, particularly when world oil prices exceed development and production costs for the projects. No matter which way you look at the situation, the projected revenue from the three projects is still huge and critical to the future development of Kazakhstan. Only national security issues are of more import to Kazakhstan. And even those issues rest, to a great degree, on the country’s financial strength and stability, which in turn depends upon the government’s existing and projected cash flow. The three projects should have been subjected to a rigorous audit, and oil companies developing the project should have been forced to comply with the terms of the original contracts.

Effective and more timely efforts should also have been made to construct another major transportation system from Kazakhstan to international markets (particularly if political relations between Iran, the West and Russia deteriorate) through Turkmenistan and Iran to either both the Persian Gulf or Turkey. If the government had been successful, it would have meant hundreds of billions of additional dollars for Kazakhstan that could have been used to develop the country for the benefit of each and every Kazakhstan citizen substantially sooner. 

The government could have developed the downstream oil business at least ten years ago, moving into processing and refining. The government could have diversified its industrial base and fostered enterprises at the higher end of the technology chain, building a more balanced economy. It could have developed stronger and more timely ties with the developing Chinese market, supplying finished products rather than just raw materials. It could have developed every aspect of the infrastructure, particularly building a road network that would run east to west to supplement the old Soviet system of roads running north and south.

It could have developed its dilapidated agricultural sector and become a huge supplier of food to central Asia, thus becoming a greater force for stability in that troubled region of the world. With greater oil revenue, all of Kazakhstan’s citizens could have benefited from increased prosperity. Most of the recommendations set forth in the strategic plans my working groups developed could have been implemented and properly executed, sending Kazakhstan on the path towards becoming a modern democratic society with a stable, thriving economy.

The Kazakhs’ entrepreneurial talent would have been unleashed to create new businesses and services. Ultimately, Kazakhstan would have developed a growing middle class with accompanying democratic institutions that would ensure the prosperity that would continue after President Nazarbayev had handed over power to his successor. President Nazarbayev could have enjoyed a happy and peaceful retirement, secure in the knowledge that he would go down in history as one of the greatest world leaders of the modern era. He might even have won the Nobel Peace Prize.

History will be the judge once all of the facts become known. It will judge the US Government’s political and economic policies towards Kazakhstan over the last twenty-five years as well as the performance of the major international oil companies in the development of Kazakhstan’s oil and gas resources since 1991 when it gained its independence. It will judge the US Justice Department’s efforts to prosecute me over the 2000 to 2010 period. Fraud can be covered up, but only for a while. Time and truth work together. I hope that my story can provide insight and maybe even inspiration for the next generation of idealists, those who will seek out the humanity, even in our greatest enemies, and try to find common ground among us. In the words of Robert F. Kennedy, ‘Let us dedicate ourselves to what Greeks once wrote so many years ago—to tame the savages of man and make gentle the life of this world.’

On a personal level, the legal proceedings have not only cast aspersions on my reputation, as Judge Pauley had pointed out, but cost me millions of dollars in lost income and legal costs. But most profoundly, the misguided actions of the justice department robbed me of ten years of freedom and the ability to contribute in even a small way to the political and economic development of Kazakhstan and the improvement in US-Kazakhstan relations during that period. Had the US legal proceedings gone forward, some of those with an interest in the proceedings may well have suffered unanticipated, significant and needless injury with the disclosure of certain non-public sensitive information.

That weighed heavily on my decision to allow the justice department to retreat, even though it deprived me of personal satisfaction of an outright acquittal. All of the elements existed for a perfect storm until the shining light of the US court system and the doctrine of separation of power shone through. But there are lessons to be learned, mistakes to be avoided, and lives not to be destroyed in the future. This is the raison d’etre of my draft treatise “Counselor to the President”. For the rest of my life, I am sure the generation of 1990-2010 will always fall under Robert Frost’s classic poem The Road Not Taken. It will be a plethora of what-ifs.

What if Nazarbayev had been able to implement the economic reform and political plans that my teams had drafted at his instructions? Would Kazakhstan today be a central Asian miracle story, a booming market economy, with a thriving democracy, free and fair elections, compulsory, state-of-the-art education, equal opportunity for women, and already pumping enough Caspian oil to be one of the top oil producers in the world? President Nazarbayev could have emerged as the true George Washington and Simon Bolivar of Kazakhstan, a historic liberator that frees his people from the economic security and dictatorship.

Such a Kazakhstan could have influenced the other four stans in the former Soviet Union to follow suit under the same reform structure of the Kazakhstan model. It could have also limited Putin’s emergence as a dictator in Moscow, trying to reestablish the autocracy of Czarist Russia with control of all fifteen constituent republics of the former Soviet Union, including not only Ukraine but also perhaps even Kazakhstan under the same guise of ‘protecting’ ethnic Russians. The questions and what-ifs are endless and will always haunt me. My inability to continue working with President Nazarbayev to encourage, promote and attain the vast potential of the development of Kazakhstan over the 2000-2015 period will always hang over me like the 10th Symphony Beethoven never wrote or the second term that John F. Kennedy never lived to see.

After all of this, the last sentence of this memoir is really quite simple. “I now realize I was the right Counselor to the President but caught between oil company and government bureaucratic conflict and incompetence.”

Q: Wow. Thank you for sharing that.

Giffen: That’s boring to death maybe, but—

Q: No, it’s pretty strong.

Giffen: I can’t say it any stronger. But the point is that I’ve got to be careful in all directions because the guys in Washington and in other places near there, as well as the guys over in the Kazakhstan, that was the whole point of, “You were my friend. You are my friend. You’ll always be my friend.”

Q: Jim, I’m thinking somebody looking back at this historically might say, why was the Bush Administration depriving a country that wasn’t an enemy, depriving oil companies or pushing oil companies to pump less oil, make less money? What was the geopolitical aim?

Giffen: Well, I don’t know but when you look at the whole thing, frankly I think one of the people that was behind an awful lot of the problems we have is former Vice-President, Cheney. I invited him to several of my parties. I gave a private dinner for Nazarbayev in New York and I invited Cheney and he attended. And then, in Washington, we had a big dinner and we invited Cheney and he attended.

But, the US Government got involved in the legal investigation of President Nazarbayev and my activities in 2000. The US Government got involved because the Swiss tried to get them involved but the US Government did not become involved initially. I would love, at some point, to talk to Preet S. Bharara (former United States Attorney for the Southern District of New York) to see what he really thought about things because my lawyers were negotiating with him. (I had five different lawyers representing me over that period of time. That’s why it cost so much money.)  I think Preet saw that this was all fucked up the way that the judge did. Even the judge, once he got all the source information from other US organizations saw that I wasn’t doing this to make money. We were in this goddamn thing to change things. And, we were starting to make a little progress. 

But, in any case, the bottom line is that our government has not been great over the last fifty- sixty years in dealing with the Soviet Union. I think Roosevelt was pretty good at doing it, but I’ve got an interest in Roosevelt.

Q: That’s your family connection.

Giffen: Yes, the family connections (June Hopkins Giffen was the granddaughter of Harry L. Hopkins who was close to FDR) and the rest. But again, it’s all these connections of all of these people from the Forrestals on. It just amazes me. All of my friends are appalled and bored at the way things are going on. But anyway, I don’t know if this has been helpful to you.

Q: No, it has been. And I just want to ask you two short questions.

Giffen: Sure.

Q: So, Nazarbayev, at this point do you want to see him again?

Giffen: Oh yes. I’d see him if he would, but he’s staying away from me.

Q: Even now?

Giffen: Yes. The last communication I had from him was through the Kazakhstan Ambassador to the United States because the President doesn’t want it connected directly to him. They’re going through a transition. But President Nazarbayev was here February of last year and he sent a message to me from the Kazakh ambassador extending his best regards and we’re friends and blah-blah-blah and all the rest. But, that’s all. And, when Petro O. Poroshenko was President of Ukraine he met Nazarbayev and Poroshenko said he was working with us. Nazarbayev then said positive things to him. So he’s not saying anything negative but he’s also being careful too because if he starts saying negative things (as some of my enemies in the Kazakhstan government would have him do) he knows it would be like getting into a fistfight with a skunk.

Q: Is he a person, as you experienced it, with a guilty conscience?

Giffen: No.

Q: No? So that makes it a little easier for him to cut ties.

Giffen: Yes.  For example, when one of the ladies that worked for me for years. . . . is the recording still on?

Q: Yeah. Should I turn it off?

Giffen: Yes.

Q: Okay.

Giffen: Happy reflective moment.

Q: So, Jim, I was thinking you taught at the Harriman Institute at Columbia for, I think, ten years.

Giffen: Ten years.

Q: And your life is remarkable, at least so far. No, it really is.

Giffen: We’ll see. If I can change the Ukrainian government, then that will be something.

Q: It still is. And so I’m wondering, back then, when you already had really neat experiences under your belt, what were you conveying to students about the big lessons in life or the big lessons in politics? What would you tell Harriman students today?

Giffen: I would tell them what I told them for ten years. When I taught my class, I always devoted the last class to talking about the future. And, I said to the students, I’m going to give you one rule of life and that is the following. Find something to do that you cannot wait to wake up in the morning to do. If you find something that you love, don’t worry about money because if you truly like what you are doing and you  enjoy it, you’ll put your full energy and your full talents in it and you’ll probably be pretty good at it. And if you are good at it, don’t worry. All of the other benefits will come with it.

The one thing that you don’t want to do is wake up when you’re 40 and say to yourself, I made a mistake. I should have done A or I should have done B.  Do it now when you can or when you think you want to. Don’t wait. And, I firmly believe in that, and it doesn’t mean that it is all about money.  Making money is, of course, important.  Obviously you have to survive and you have to eat and your family has to be taken care of but it is important that you go through life and be happy with it.

I see so many people that become parts of either corporate or government bureaucracies that are just turning in time clocks. I couldn’t wait to get to my office in the morning. And I didn’t want to leave. And I wanted to do it every day. And I never did any of this for money. Money was never the issue. The issue was having the satisfaction of accomplishing something. So, for example, I wanted to become—the reason I got to doing what I was doing, and made the decisions that I did, was that when I was at Berkeley and looking to the future and asking myself, what is it that you really want to do? And I said, well, I want to help people. And that’s why I want to become a doctor because that’s a way of helping people (although I didn’t know shit from shinola about what doctors did other than what the average person knows).

And, I said, but, you know, if you are a doctor, you can help a number of patients but only a limited number. On the other hand, if you are a hospital administrator, you can probably help a hundred times the number of people. But, if you are a head of health care in a given state, think about how many people you could really help. Yes, if you were going to do that, why not do it for the entire United States and help out everybody in the country? Maybe that should be my objective. 

And then I said to myself, well if helping people is really your objective, why not try and find an issue that can help the whole world? What could I possibly do as a single human being (not having any hand of God on you). What was the single most important issue facing the world at that time? And that’s where I got to the nuclear issue.  Then I started asking, where can you be most effective and get involved immediately, not have to wait fifty years until you’re seventy or eighty like the guys out there then? They were seventy or eighty years of age. How could I get involved tomorrow?

And then I said, well, go to an area that you can learn and get involved somewhat quickly. And, I decided that was US-Soviet trade and economics. Bring the two most powerful countries together as quickly as possible because the threat of nuclear war was then and is today, the single most important issue facing mankind, period. Anybody want to argue that? Unfortunately, people do not realize the amount of destructive force that the two countries had then and even more today.

In the early 1990’s when I first became involved in Kazakhstan, Kazakhstan had 104 SS-18 missiles. Each SS-18 missile had ten warheads. Each warhead had one million tons of destructive force. Do the math. They had 104 SS-18 missiles each with ten warheads. You only need one or two of those to hit the United States and there would have been havoc the likes of which the world never knew. Again, they had 104 missiles. The nuclear issue was then, and still is today, the number one issue. And my question was how can any individual work effectively on that issue?

Well, if you could get a small number of real experts into the White House and other government organizations today that know what the hell they’re doing, it would be very helpful. The problem that I had with US government organizations at the time (as well as today) is you can’t get anything done in the various government organizations. Poor Toby (Toby Gati), she was in both the State Department and the NSC.   I just felt sorry for her. She probably had to spend too much time on administrative and US political issues. . . and she knew what she was doing.  She is a dedicated and loyal American who probably knew more about this Soviet Union than anyone else in the world – never mind anyone else in the United States.

And so, even if you are offered a job today in the US government, and you could have the pick of any job, I  would not know what to do.   In the US Government, who would have any of that power? [Henry A.] Kissinger managed to do some things. He managed to get power when he was at the NSC. There’s no doubt about that. And certain other people did. And even being President, you’ve got to put up with the Congress and the public and the this and the that. You’re constantly making decisions that are slightly watered down in order to appease this person or that person or this public or that private organization and all the rest.

Well, I was lucky that way. I didn’t have to do that. I just said to myself, fuck that all. I’m not going to do that. I’m going to get US-Soviet trade going. And I’m going to meet with the people that need to get it done such as Gorbachev and saying that there were ways to get things done.  For example, I suggested to Gorbachev that we should form a trade consortium. We’re going to put a group of companies together. We’re going to solve the goddamn financial issue. And we’re going to do this in, hopefully, one or two years. We’re not going to get this done in ten years or twenty years. That’s bullshit. We’re going to get these major investment projects done now.  We started in the Soviet Union in 1987 and agreements were signed in 1988, 1989 and 1990.  I had proposed an “Accelerated Economic Development Plan” for the Soviet Union.  While it was being executed, the Soviet Union collapsed at the end of 1991.  I then became Counselor to the President of the Republic of Kazakhstan Nursultan Nazarbayev.

My great regret is that because of the legal proceedings, I couldn’t continue to effectively keep my foot on the oil companies’ throats. And the oil companies, together with the Kazakh government bureaucracy were able to make it look like things were going all right but they were not going as good as they should have been.

And, if we had turned the situation around with respect to Kazakhstan’s oil projects, it  would have had an influence on other Kazakhstan government organizations to get them moving on other issues. For example, in Kazakhstan, I was trying to get all areas (military, national security, economic, social, etc.) moving.  For example, we were trying to get the pension system going (which is more complicated than nukes). It is unbelievably complicated to try and get it operating correctly. 

So, of course, the other thing that I could do was to become a teacher and try and inspire others to get out there and do things. The trick was to get students to do things. 

I’ll tell you a story.

At the law firm that I went to work for in California when I was in law school, I was like most students – young and I didn’t know my ass from first base. I was married with two children and had very little money. I had to have a job on the side. And so, I went to work for a small law firm named Baker, Ancel and Redmond through my wife’s contacts with her father. Louis Baker, the senior partner of the firm, was also in charge of California Democrats for John Kennedy. He was in charge of Kennedy’s campaign in California. 

I went to work for him while I was in law school basically doing grunt work (research), which is what all law students and young lawyers do. Research twenty-four hours a day, seven days a week. When I got out of law school, Louis allowed me to have my nights and my weekends to write my first book. I would work like hell for eight to ten hours a day at the law firm but then the rest of the time at night and the weekends were mine. 

Finally Baker came to me one day and said, “Young man, you’ve got to make a decision.” And I asked, what’s that, Louis? And remember that this was a family friend with Hopkins and all the rest which went back years. And I said, what’s that, Louis? He said, “You’ve got to do one of two things. You’ve either got to plant your ass in this chair and become a good lawyer and work twenty-four/seven at doing that, or you should leave the firm and write the book because you can’t do both.” 

I then asked,  Louis, if you were me, what would you do? And he said, “What would I do? I would leave the firm and write the book because if you don’t, when you’re forty, you’re going to wake up and hate yourself.” And he said, ‘But I want you to stay because I want you to become a partner. But you think about it.” I went back, and after two weeks thinking about it, I came back and said bye-bye, Louis! And so, we departed. I then joined the public defender’s office in Los Angeles so that I could get a nickel to live off of but I would have my weekends and my nights to write the book.

The trouble was that everybody in the goddamn courtroom in those days (that is to say, both the the district attorneys and the judge) knew what I was doing. So, when I was in the courtroom defending cases, I was also correcting my book. Occasionally, the judge would call me up to the bench and say, “Mr. Giffen, put that goddamn book away. If somebody notices this, we’re all going to catch hell.” But, I would respond that what I was doing was what I’m supposed to be doing – effectively defending my cases. everything. I’m getting my clients off.  And he would then say - Jim, put that goddamn book away.  So I stopped doing both things at the same time but I continued working on the book between court cases.  My book “The Legal and Practical Aspects of Trade with the Soviet Union” was finished in 1968 and published in 1969.

But as far as teaching your students goes, what I tried to tell my students when it came to the last class was you really have to find something that you want to do and that you enjoy, that’s in your heart that you just can’t wait to wake up in the morning.  The best advice I ever got from anybody, was being told that. And it’s been true ever since because now, when I look back again, this isn’t about money. Of course, everybody needs money but it’s about are you happy with what you’re doing?  Is the world better off because of what you are doing?

Today, I’m involved in the Ukrainian situation. I’ve already put a plan together on how to change the Ukrainian government. It’s in charts, and it’s ready to go. 

The same problem exists in Mexico. The Mexicans say they want to change things. The Mexicans have substantial financial problems.  They could solve their financial problems by producing more oil and gas.  The Mexicans are producing approximately 1.7 million barrels a day and should be producing eight million barrels a day. Production could be increased within four years - maybe three years. But the President of Mexico has got to be in control and want to do it because all the bureaucrats in Pemex (the Mexican oil company) and the bureaucrats in the local districts and all the rest, will all come out of the woodwork. And there’s going to be hell to pay. And the President of Mexico has to be a strong administrator. He has to be a strong president.

That’s why I consistently look at the record of Singapore’s Lee Kuan Yew. When he came into power, he told his government, “I’m paying you each a salary of one million dollars - each one of you, one million dollars to do your job, but not one penny more. And if I catch you cheating or stealing, I’m going to cut your balls off. You’re going to be in deep trouble. But, you get the million dollars to do your job professionally and do your job only.” 

And that’s the whole trick of governing in big bureaucracies -  figuring out a way to get it done. But in order to do that, you need a leader. Kazakhstan had that in President Nazarbayev. The Soviet Union had that in Gorbachev for a period. Gorbachev wanted to get things done but he just got in over his head. He was a great guy. I loved him. He had a great sense of humor. We joked about all kinds of things. And, he’s intelligent.

But, the bureaucracy and the thieves around him were just overpowering. Some say it was the KGB but it wasn’t just the KGB. Yes, there are plenty of bureaucrats that worked for or with the KGB, but they were bureaucrats. Everybody was grabbing everything. That’s one of the reasons I left Russia and went to Kazakhstan. In 1991, when the whole thing fell apart (the Soviet Union), there were just too many people stealing too much and they were scumbags. I knew many of these oligarchs at the time. We tried not to let them in the government meetings I was participating in. 

Now, we are in a period of time when things have gone downhill, and maybe at some point they’ll come back, but I don’t know when. And, I don’t see any signs of Putin’s desire to do that. But I also don’t have the energy of a young man to fight that today.  If I were a young fellow today and if Russia was the issue,  I’d figure out a way to start getting involved over there and start making friends with as many powerful people as I could and get them to start coming together without getting knocked off. You’ve got to be careful of not getting knocked off because these guys—maybe, I shouldn’t tell you all these stories, but there are many things that you just wouldn’t believe that went on.

Q: You have more stories than we can possibly contain.

Giffen: Yes, I’ve got more stories.

Q: Should I stop recording?

Giffen: Yes.

Q: Okay.



[1] I had secretly named the main Kazakhstan off-balance sheet bank account “Condor” after the movie “Three Days of the Condor” about the CIA because of things that were going on that few peole knew about.