Exxon fined $2m for Russia sanctions breach under Tillerson

  • July 20, 2017

The US Treasury has accused ExxonMobil of behaving with “reckless disregard” for violating Russian sanctions while Rex Tillerson, now US secretary of state, was chief executive in 2014.

The Treasury’s Office of Foreign Assets Control fined Exxon the maximum penalty of $2m in what it called an “egregious” case, saying it had failed to disclose breaches of sanctions over deals with Igor Sechin, chief executive of Russia’s state-controlled oil group Rosneft.

Exxon responded with an angry rejection of the Treasury’s allegations, describing Ofac’s action as “fundamentally unfair”. It accused Ofac of “trying to retroactively enforce a new interpretation of an executive order” inconsistent with guidance from the White House and Treasury.

The fine comes at a time of intense scrutiny of links between the US and Russia, prompted by allegations of Russian interference in last year’s election campaign to help Donald Trump become president.

Ofac said on Thursday that presidents of Exxon’s US subsidiaries had violated sanctions by signing “eight legal documents related to oil and gas projects in Russia with Igor Sechin”, who had been designated as a sanctioned individual. It said the documents were signed in May 2014, a month after the sanctions on Mr Sechin and others were imposed.

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Exxon said the documents were counter-signed by Mr Sechin “in his official representative capacity”.

The energy group also argued that Bob Dudley, BP’s chief executive, had been allowed to participate in Rosneft board meetings with Mr Sechin, “so long as the activity related to Rosneft’s business and not Sechin’s personal business”.

It referred to official statements including a Treasury briefing on April 28, 2014, and press reports in the New York Times and Wall Street Journal in April and May, as supporting its view that the sanctions applied to Mr Sechin only “individually”.

Ofac dismissed Exxon’s objections, arguing that the “plain language” of the sanctions regulations showed they was no distinction between Mr Sechin’s personal and professional interests.

The sanctions were imposed by the US following Russia’s annexation of Crimea and military support for rebels in eastern Ukraine. They were intended to hit the economic interests of President Vladimir Putin and his allies without affecting oil supplies for world markets.

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The Treasury said at the time that Mr Sechin, who served during 2004-08 as Mr Putin’s deputy chief of staff, had “shown utter loyalty to Vladimir Putin — a key component to his current standing”.

Exxon was one of the US companies most affected by the Russian sanctions having signed a series of deals between 2011 and 2013 with Rosneft for projects in the Bazhenov shale of western Siberia, the deep waters of the Black Sea, and the Arctic.

All of those projects were blocked by US sanctions, and Exxon was forced to shut down its joint ventures with Rosneft at a cost of up to $1bn.

Speaking to Exxon shareholders in May 2014 — the same month the alleged sanctions violation took place — Mr Tillerson said: “We do not support sanctions, generally, because we don’t find them to be effective unless they are very well implemented.”


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