21 May 2021
US oil and gas company Frontera spent $1 million on lobbying in an attempt to sway an international arbitration case in Georgia, while many of its workers went unpaid, openDemocracy, OC Media, and Sludge report today.
For years, the company promised Georgia and other Black Sea states their ‘energy independence’, and was originally founded by Bill White, a former US deputy secretary of energy, and the sons of a former US treasury secretary and the chair of US oil giant Conoco.
But since Frontera’s beginnings in the post-Soviet ‘gold rush’ years, when Western companies sought new and cheap business opportunities abroad, the company has fallen on hard times.
Since then a high-profile and rancorous dispute between Frontera and the Georgian Government has broken out, a dispute which has included the company’s Georgian employees being left out-of-pocket.
Eighty-five employees have sued Frontera for unpaid wages. Since the still dormant lawsuit was filed in 2019, two of them have died.
Zaza Tsiklauri, a former borehole tester and operator at Frontera, died of brain cancer while still waiting for his back pay, which he needed to pay for urgent treatment.
‘I’m not blaming anyone for his death, but it [his salary] could have extended his life’, Arabuli said.
Another Frontera worker, Avtandil Onanashvili, 53, took his own life last summer after the loss of his job led to the break up of his marriage and a descent into poverty, his colleagues said.
‘How can no one realise that the miserable statements like those made about Frontera both cause anti-Western sentiments and kill our citizens?!’, Irakli Petriashvili, Chair of Georgian Trade Union Federation (GTUC), asked rhetorically after Onanashvili’s death, referring to what he saw as the Georgian authorities’ soft position towards the company.
Meanwhile, Frontera has found the money to lodge a concerted lobbying campaign in Washington, one that has threatened to impact Georgia’s strategic relationship with the West.
‘Vladimir Putin’s puppet has attacked foreign investment in Georgia’
In 2018, the Georgian Oil and Gas Corporation took Frontera to international arbitration over material breaches of its production sharing contract, including refusing to return exploration territory, referred to as Block XII, to the corporation. In 2015, Frontera claimed it had identified 3.8 trillion cubic metres of gas in eastern Georgia — which it called a ‘historic new chapter in Georgia’s move towards energy independence’.
In response to the Georgian state Oil and Gas Corporation’s arbitration bid, Frontera sought to defend its business by mounting a public campaign over Block XII, employing lobbyists and using US congressmen to pressure the Georgian government into withdrawing their claims, according to lobbying records and internal management correspondence reviewed by the authors. The company did not respond to requests for comment.
As one Frontera board member said, the Georgian Oil and Gas Corporation arbitration — and potential loss of exploration territory — was a move that could ‘ruin our company’, according to an internal email.
This lobbying campaign tied Frontera’s commercial interests to Georgia’s broader democratic crisis in the wake of the violent police dispersal of public protests in the capital, Tbilisi, in 2019, as well as the danger of Russian influence.
‘Vladimir Putin’s puppet has attacked foreign investment in Georgia and crushed basic human rights’, Texas Republican congressman Pete Olson said from the floor of the US House of Representatives in January 2020, referring to the Georgian government’s oligarch backer, Bidzina Ivanishvili.
Olson then named Frontera Resources, at the time a few weeks away from the final arbitration decision.
‘A company from Texas, Frontera Resources has been drilling in Georgia for years and years and years. They’ve created great jobs in America, great jobs in Georgia. They’ve created freedom,’ Olson continued, before connecting the US company’s contract dispute to Georgia’s broader democratic concerns.
‘That was until the government took over all of their operations […] Now, they are drilling zero wells in Georgia’, Olson said, casting the legal dispute as ‘expropriation’.
‘The protesters in Georgia need our support’, he continued. ‘Join me in raising our voices for freedom in Georgia.’
Olson had previously received campaign donations from Frontera chairman and CEO Steve Nicandros, who gave a total of $5,200 to the Texas congressman in 2017–2018. Olson did not respond to request for comment. There is no suggestion of any link to the donation.
Political donations and lobbying
Records from the US Federal Election Commission (FEC) show that Nicandros (whose father was once chairman of Conoco and a friend of George Bush Senior) spent $73,450 on political donations to 16 US congressmen and senators in 2017–2020. All 16 co-sponsored legislation that was lobbied for Frontera, made public statements to the Georgian and US authorities in the company’s defence or appear to have made private inquiries.
The Texas-based company also spent a further $890,000 on lobbying fees relating to its arbitration battle with Georgia in 2017–2021. Lobbying disclosure filings state that $850,000 went to Washington government relations firm Cornerstone Government Affairs.
‘The evidence appears to show that Frontera clearly funded a lobbying campaign in Washington, aimed directly at getting the Georgian government to back off of its claims against the company’, commented journalist Casey Michel, who has previously reported on foreign influence campaigns in the US.
Cornerstone were contracted, according to official filings, to lobby members of the US House of Representatives, US Senate, as well as the US State Department and Commerce Department on Frontera’s behalf. Cornerstone lobbyist Tyler Nelson, former chief of staff to Pete Olson, now sits on Frontera’s board as a non-executive director, according to recent US court filings. Neither Cornerstone nor Nelson responded to a request for comment.
‘Georgia’s democratic backsliding over the past few years has clearly raised alarm bells across the West. But the fact that Frontera and its lobbyists would use that backsliding for their own ends is a new low’, Michel continued.
Georgia sees US support as vital in defending its interests against the Russian Federation, which backs Abkhazia and South Ossetia. As one analyst put it, Washington DC has, in the past, served as the ‘second arena’ of Georgian politics, where the country’s elite seeks influence over domestic rivals and foreign opponents.
‘A company that wants to talk about being mistreated in Georgia can find relatively receptive ears in Washington’, said US-Georgia analyst Lincoln Mitchell.
For the US establishment, ‘Georgian politics has largely been presented through the lens of [former president] Mikheil Saakashvili’, Mitchell noted, referring to the former president’s casting of the current Georgian Dream government as a pro-Russian political force damaging to the country’s pro-Western path.
Aside from public statements, a Frontera management presentation from April 2018, released via US court filings, states that lobbyists from Cornerstone secured letters by 20 Congressmen to the Georgian Prime Minister and by four senators to US Secretary of State Rex Tillerson in Frontera’s defence. These letters are not in the public domain, and the authors were unable to obtain them.
The presentation also states that in 2017 and 2018, Cornerstone helped land draft legislation in the US House of Representatives pressuring the Georgian government over the company’s arbitration dispute.
For example, in late October 2017 — three weeks before Frontera was supposed to transfer its oil and gas exploration territories back to the Georgian Oil and Gas Corporation under its contract — Frontera’s lobbyists at Cornerstone helped land a House resolution, as seen in the 2018 management presentation.
The resolution, introduced on 23 October and co-sponsored by 20 US congressmen, ‘reaffirm[ed] US support for the government of Georgia, its people, and its membership in NATO’.
But the resolution, introduced by Texas Congressman Ted Poe, also called on the Georgian government to ‘enforce the rule of law with regard to adhering to contractual obligations’ and ‘demonstrate its commitment to welcome and respect freely negotiated conditions of business investment.’
Poe received $3,700 in donations from Frontera chairman Nicandros in 2017, according to the FEC. There is no suggestion of any link between the donation and the resolution.
On 6 December 2017, some three weeks after Frontera refused to hand over the exploration territory according to its contract triggering arbitration proceedings with the Georgian Oil and Gas Corporation, Republican Congressman Steve Russell proposed a “Georgian Fair Business Practices Sanctions Act” — a move lobbied on behalf of Frontera, according to the company’s 2018 management presentation.
This bill proposed that the US President regularly submit reports to Congress on ‘whether or not the government of Georgia is undermining commitments or contractual agreements made with US business persons operating in Georgia’, and that Georgian state officials could be sanctioned if reports found to the contrary.
According to the FEC, Russell received a $5,000 campaign donation from Nicandros in 2018. There is no suggestion of a link between the donation and the draft legislation.
‘We certainly had some discussions together’, said Steve Russell regarding contact with Cornerstone over the Georgian Fair Business Practices Sanctions Act. ‘In terms of whether or not me and my integrity would be for sale for something so cheap, that’s not even open for discussion’, said Russell when asked about the donation.
‘People will try to protect their interests. That’s kind of politics and foreign policy 101’, he continued.
‘When you are trying to solve a problem, you wind up with allies. And you also end up with enemies’, said Steve Russell when asked about his support for Frontera. ‘We crossed paths [with Frontera] because of things that I was pursuing anyway. I was just concerned about what the implications were for NATO if we allowed a naive approach to eastern Europe. And that was really a lot of my motivation.’
A company in dire straits
Frontera’s public position on the arbitration was, meanwhile, bullish. When the company announced the suit in April 2018, it stated that the Georgian Oil and Gas Corporation’s arbitration request was ‘without merit’ — and that it was ‘confident of its standing and complete compliance with the ’.
But internally, management correspondence paints a dire financial picture for the company, which Frontera executive director Zaza Mamulaishvili described in a March 2018 email to the board as ‘produc[ing] less than $3 million worth crude oil annually and losing money every month’.
Frontera also held considerable debt, Mamulaishvili said, which made it a ‘very high risk’ for possible investors — unless the company expanded operations and used its influence against the Georgian Government.
‘What is going on in [the Taribani oil field], Tbilisi, and Washington DC right now is our best chance to make money’, Mamulaishvili continued. ‘USG’s [US Government] continuous strong support’, he wrote to the Frontera board, together with ‘local influence’, would be key to the company pulling itself back from the brink.
In an email a few weeks later, Frontera CEO Steve Nicandros noted that, together with their lobbying firm, Cornerstone Government Affairs, he had invited Republican Senator Lindsay Graham for lunch at the company’s office in Houston, Texas, on 2 May 2018. Graham, Nicandros wrote, ‘has been and will be instrumental in providing leadership influence from the US Senate to push back on Georgia’s current initiative against us’.
Later that month, Steve Nicandros made a total of $10,000 in donations to Graham’s campaign, according to the FEC. Graham’s office did not respond to a request for comment. There is no suggestion of any wrongdoing.
In February 2019, Oklahoma Congressman Markwayne Mullin reintroduced the ‘Georgian Fair Business Practices Sanctions Act’ to Congress with 11 co-sponsors, eight of whom received donations from Nicandros between 2017 and 2019.
For example, one of the co-sponsors for this bill, its preceding version and the 2017 resolution, Texas Republican Congressman Brian Babin, received a total of $3,000 in donations from Nicandros during 2018-2019. In September 2019, Nicandros made a $3,000 donation to Mullin’s election campaign.
Neither Babin, nor Mullin responded to requests for comment. There is no suggestion of any link between these donations and the draft legislation.
The dispute heats up
But it was when the standoff between Frontera Resources and the Georgian Oil and Gas Corporation turned public in early 2020 that the US-Georgia special relationship became particularly evident in the first half of 2020.
‘There was a period in early 2020 where almost every week, there were some blackmail stories about Georgia in relation to Frontera, which suggested that the Georgian Government “is acting against the Americans”, “the country is going backward in its democracy”,’ said economist Vakhtang Charaia, referring to open letters in Frontera’s defence to US Secretary of State Mike Pompeo by Markwayne Mullin, Randy Weber and Brian Babin.
These letters, Charaia noted, were widely picked up in the Georgian media in January and February 2020, alongside another initiative by Democrat politicians over concerns that Georgia was not meeting its reform targets.
‘The campaign was damaging for the Georgian government — not only politically in terms of external relations, but domestically, too’, said Charaia.
‘It doesn’t matter whether these messages come officially from the US administration or from a congressman or a lobbying company, in Georgia, it’s just negative noise.’
‘I believe that these statements by US Congressmen were the result of misinterpretation and distortion of the facts by Frontera’, said Vazha Khidasheli, chair of the supervisory board at the Georgian state Oil and Gas Corporation. ‘Otherwise I could not suspect that such high-level representatives of the US establishment could support this.’
In the end, it appears that Frontera’s campaign had little effect on the final arbitration decision, but they continued to pressure the Georgian government.
In April 2020, the government announced that it had won the majority of its claims. In response, Frontera contested this, claiming the government’s statements had ‘purposefully misled and distract[ed] from the actual results of the arbitration court’s ruling’, and that the company was ‘pleased’ with the final results. According to the Georgian Oil and Gas Corporation, the arbitration award remains confidential because Frontera have not given their consent to publish it.
Several weeks after the final arbitration decision was announced in April 2020, US Senators Ted Cruz and John Cornyn, as well as Congressmen Markwayne Mullin and Jodey C Arrington, wrote to US Secretary of State Mike Pompeo, claiming that Frontera ‘face[d] possible expropriation from the Georgian Government’.
Arrington received $3,000 in donations from Nicandros in February 2020; Cornyn had previously received $2,850 in 2018-2019. Neither Arrington, nor Cornyn responded to requests for comment. There is no suggestion of any link between these donations and the letter.
‘The Georgian government and [the Georgian Oil and Gas Corporation] decided expressly not to hinder Frontera’s operation in Georgia in any way during the arbitration’, said the corporation’s Khidasheli, citing the company’s ‘aggressive lobbying campaign’ as, for example, one of the reasons the Georgian Oil and Gas Corporation did not attempt to tackle apparent environmental damage at the Frontera site.
In July, Mullin published an op-ed in The Hill, where he once again accused the Georgian government of expropriating Frontera’s business, provoking Georgian Foreign Minister David Zalkaliani to call the US congressman a Frontera lobbyist.
Later that month, the Georgian government returned 1% of the contract area to Frontera, which covers the existing production site in Dedoplistskaro to the company’s control.
‘Frontera instigated criticism from the US and the Georgian Government gave them 1% of the contract area back’, said the Georgian Oil and Gas Corporation’s Khidasheli.
‘We wish to once again be clear that no legal basis has ever existed for the unilateral cancellation of our contract’, Frontera said at the time. ‘The government of Georgia’s continued insinuation to the contrary is wrong and amounts to intentional harassment.’
‘After this decision [to return 1% of the contract area], the negative press stopped,’ said Charaia.
‘What does America have to do with paying overdue salaries?’
While Frontera and its chair Steve Nicandros began spending thousands of dollars on lobbying and political donations in 2017, the company’s Georgian employees have been left without wages and jobs.
Frontera’s now-former employees have sued the company over unpaid salaries. Eighty-five workers claim that the company failed to regularly pay them monthly salaries since December 2016 and that by November 2019, the company owed them 11-months of back pay in addition to two months for termination-without-notice as per Georgian labour law.
A month after workers filed their lawsuit, Frontera responded by firing over 100 employees, including all the plaintiffs, and counter-suing six claimants for hindering oil extraction, which allegedly incurred damages worth nearly $7,000.
Tamar Surmava, a lawyer at the Georgian Trade Union Federation (GTUC), confirmed that there had been no hearing on the former employees’ claim of unpaid wages since November 2019.
‘We live on the edge of Georgia. There is no transit or anything here to create jobs, these [jobs] were the main [source of employment] for us’, said former Frontera employee Maro Kochiashvili.
Last year, independent MP Beka Natsvlishvili rebuked the Georgian authorities for their 'colonial' attitude towards Frontera and their Georgian workers, demanding that the government step in to compensate them for their unpaid salaries.
What Frontera’s laid-off employees got instead was an annual payment of ₾1,200 ($350) in government assistance twice since the coronavirus pandemic hit.
‘We are self-respecting people, we can work. I want the government to get our jobs back and we’ll be able to provide for our families’, another former Frontera worker said. ‘I don’t want to beg for help instead’.
Several former Frontera employees, including Nodar Tskhvediashvili, a former oil extraction operator with 20 years of experience, complained that the company’s conflict with the Georgian government had become unfairly ‘politicised’ and falsely portrayed as ‘anti-American’.
‘What does America have to do with paying overdue salaries?’ Tskhvediashvili asked.
