Exxon to Challenge Treasury Department Ruling on Russia Sanctions

Violet Powell
July 21, 2017

Exxon Mobil Corp. must pay a $2 million fine for showing "reckless disregard" for USA sanctions on Russian Federation while Secretary of State Rex Tillerson was the oil giant's CEO, the Treasury Department said Thursday. The sanctions prohibit any business dealings with those listed.

The US Treasury Department said Exxon showed "reckless disregard" for rules.

The fine came after a USA review of deals Exxon signed with top Russian oil producer Rosneft weeks after Washington imposed sanctions on Moscow for annexing Ukraine's Crimea region.

OFAC said it had considered and rejected Exxon's explanation that it had believed from press accounts of the sanctions that there was a distinction between Sechin acting in a "professional" rather than a "personal" capacity.

That same month, Neil Duffin, president of subsidiary Exxon Mobil Development, signed several deals to continue their work on the massive Sakhalin oil and natural gas project on Russia's eastern coast.

With rising tensions between Russian Federation and Ukraine in 2014, western powers, including the US, imposed economic and technological sanctions against Moscow. State Department spokeswoman Heather Nauert told reporters on Thursday that the agency was alerted to the fine on Wednesday.

One mitigating factor in the penalty against Exxon, however, may be due to the fact that the Treasury's Office of Foreign Assets Control (OFAC) had not penalized or found violation against the American oil giant in the five years preceding Exxon's first illicit transaction.

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The Treasury Department "is trying to retroactively enforce a new interpretation of an executive order" inconsistent with its prior guidance, Jeffers said.

He added: the "action is fundamentally unfair".

But, according to Treasury, "despite these prohibitions and ExxonMobil's global market and sophistication, ExxonMobil moved forward with signing the legal documents with designated person Igor Sechin between on or about May 14, 2014 and on or about May 23, 2014". In 2014, the Obama administration did not sanction Rosneft, the energy company, but it did sanction Sechin, who led the company. "But the problem here is that it was signed by Sechin himself".

The deal came at a time when other oil companies, including BP and Total SA, were clamoring to enter Russian Federation, aiming to tap its vast oil and natural gas reserves.

While at Exxon Mobil, Tillerson generally opposed sanctions because he thought they were usually ineffective.

As the United States and others tightened Russian sanctions, ExxonMobil's ability to operate there dwindled.

The US imposed sanctions against Russian Federation amid rising tension in Ukraine.

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