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Exxon fined over Tillerson-era breach of Russia sanctions

The Treasury Department has fined Exxon Mobil two million US dollars (£1.5 million) for showing "reckless disregard" for US sanctions on Russia while Secretary of State Rex Tillerson was the oil company's chief executive.

Exxon has sued the US government to stop the fine.

The Treasury said that Exxon violated sanctions when it signed contracts in May 2014 with Russian oil magnate Igor Sechin, chairman of government-owned energy giant Rosneft.

The US blacklisted Mr Sechin, Mr Tillerson's longtime business associate, as part of its response to Moscow's actions in Ukraine and annexation of Crimea.

The same month that Exxon signed the deals, Mr Tillerson said the company generally opposed sanctions and found them "ineffective".

Exxon maintained it had done nothing wrong.

Hours after the fine was announced, the Texas-based company sued Treasury Secretary Steven Mnuchin and the government, saying the US had clearly told companies that doing business with Rosneft was allowed - just not with Mr Sechin himself.

As America's top diplomat, Mr Tillerson has insisted the sanctions will stay in place until Russia reverses course in Ukraine and gives back Crimea.

Still, the sanctions breach on his watch raises significant questions about his ability to credibly enforce the sanctions and to persuade European countries to keep doing so.

Yet the Treasury Department said that Exxon's "senior-most executives" knew Mr Sechin was blacklisted when two of its subsidiaries signed deals with him.

The Office of Foreign Assets Control, or OFAC, said Exxon caused "significant harm" to the sanctions programme.

The dispute between Exxon and the government centres on whether the sanctions differentiated between "professional" and "personal" interactions with Mr Sechin, who had been blacklisted only weeks earlier.

Exxon, in its lawsuit, noted that the former Obama administration had said the sanctions strategy was to target individuals like Mr Sechin who were contributing to the Ukraine crisis - not the companies they might manage on Russia's behalf.

The company pointed out that a Treasury Department spokesman had even said it would be permissible for an American chief executive to attend a Rosneft board meeting with Mr Sechin as long as it was not related to Mr Sechin's "personal business".

Rosneft itself was not subject to sanctions at the time.

"OFAC seeks to retroactively enforce a new interpretation of an executive order that is inconsistent with the explicit and unambiguous guidance from the White House and Treasury," Exxon said in the suit.

Not so, said the Treasury Department, arguing that the government never gave Exxon or anyone else a reason to believe there was an exception for professional dealings.

The government noted that its website at the time explicitly warned companies not to enter any contracts signed by people on the blacklist.

The US said that the presidents of two of Exxon's subsidiaries and Mr Sechin had signed eight legal documents in May 2014.

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.

A photo posted on Rosneft's website shows Mr Sechin and Mr Duffin smiling broadly and shaking hands at a conference table with documents and a pen in front of them.

A few days later, Mr Tillerson was unambiguous about Exxon's opposition to the sanctions during his company's annual meeting.

"We do not support sanctions, generally, because we don't find them to be effective unless they are very well implemented comprehensibly and that's a very hard thing to do," Mr Tillerson said.

Mr Tillerson had played a central role over the years in developing that multibillion dollar deal. Mr Tillerson knew both Mr Sechin and Russian President Vladimir Putin for more than a decade before he became secretary of state.

The Treasury Department called the violation an "egregious case" and noted that Exxon "is a sophisticated and experienced oil and gas company that has global operations" and should know better when it comes to US sanctions.

It levelled the statutory maximum civil penal of two million dollars for the breaches. Exxon's suit asks the court to set aside the fine.

AP

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