ExxonMobil Contests Russia Sanction Violation Fine

24.07.2017 -

ExxonMobil is contesting a $2 million fine from the US Treasury Department for violating sanctions against doing business with Russia. The discussion revolves around a deal made with Russian state oil company Rosneft in 2014, when current US Secretary of State Rex Tillerson was CEO.

The oil and petrochemicals giant has filed suit against Treasury and its head, Secretary, Steven Mnuchin – a cabinet colleague of Tillerson’s – in hope of getting the penalty withdrawn. In a statement dated Jul. 20, Exxon called the fine “fundamentally unfair,” saying it assumed the transaction had been cleared by the administration of former President Barack Obama as it had not been informed otherwise.

At the heart of the dispute is whether the oil multinational violated sanctions by signing eight contracts with Russian state-owned oil group Rosneft. Exxon’s position is that the contracts were not blocked by the sanctions, even if signed by Rosneft CEO Igor Sechin, who

had been blacklisted by the Treasury a month earlier. This was not relevant, the oil group argues, as it was not doing business with Sechin as an individual.

Treasury said its website warns companies to be cautious about entering into contracts with people who are under sanction, and that Exxon executives knew of Sechin’s status. The group has projects in Russia that are allowed under US sanctions, including a production-sharing deal to pump oil on Sakhalin Island off the east coast of Siberia. Other projects, said to be worth billions of dollars, are stalled.

Rosneft has not canceled the contracts, which foresaw exploring for crude oil and possibly tapping shale gas reserves in Russia's Arctic, Black Sea and Siberian regions All work was stopped in 2014, when sanctions were imposed, but the projects could be resumed if sanctions are lifted, opening vast new drilling areas for Exxon in the thawing Arctic. Exxon has repeatedly called for a waiver but this has been denied.

Removal of the sanctions does not look likely any time soon, although a newer, more restrictive plan proposed by the US Senate may be modified. Congress is bent on teaching Russian President Vladimir Putin a lesson for Russia’s alleged interference in the US presidential election of November 2016. President Donald Trump, according to news reports, is prepared to go along with the new legislation as proof he is not in Putin’s pocket.

The US House of Representatives is reportedly close to agreeing on a bill that would amend the Senate’s June legislation preventing US businesses from working on or supporting energy projects that include any participation by Russian companies, even outside Russia.

The new version would put a figure on Russian involvement in joint projects, limiting its companies’ participation to 33%. The proposed change is said to represent a modest victory for companies doing business in Russia.  Without it, critics argued, Russia would be able to elbow US companies out of energy projects globally simply by making small investments in them.