Exxon fined $2 mil­lion over sanc­tions

Oil giant sues U.S., dis­putes find­ing of ‘reck­less dis­re­gard’ on Tiller­son’s watch


WASHINGTON — Exxon Mo­bil Corp. must pay a $2 mil­lion fine for show­ing “reck­less dis­re­gard” for U.S. sanc­tions on Rus­sia while Sec­re­tary of

State Rex Tiller­son was the oil giant’s chief ex­ec­u­tive of­fi­cer, the Trea­sury De­part­ment said Thurs­day.

Exxon in turn sued the

U.S. govern­ment to stop the fine.

Trea­sury said Exxon vi­o­lated sanc­tions when it signed con­tracts in May 2014 with Rus­sian oil mag­nate Igor Sechin, chair­man of govern­ment-owned en­ergy giant Ros­neft. The U.S. black­listed Sechin, 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, Tiller­son said the com­pany gen­er­ally op­poses sanc­tions and finds them “in­ef­fec­tive.”

Exxon main­tained it had done noth­ing wrong. Hours af­ter the fine was an­nounced, the Texas com­pany sued Trea­sury Sec­re­tary Steve Mnuchin and the govern­ment, say­ing the U.S. had clearly told com­pa­nies that do­ing busi­ness with Ros­neft was al­lowed — just not with Sechin him­self.

As Amer­ica’s top diplo­mat, Tiller­son has in­sisted the sanc­tions will stay in place un­til Rus­sia re­verses course in Ukraine and gives back Crimea. Still, the sanc­tions breach oc­curred on his watch, and now he is re­spon­si­ble for en­forc­ing the sanc­tions and per­suad­ing Euro­pean coun­tries to also con­tinue do­ing so.

The Trea­sury De­part­ment said Exxon’s “se­nior-most ex­ec­u­tives” knew Sechin was black­listed when two of its sub­sidiaries signed deals with him. The Of­fice of For­eign As­sets Con­trol said Exxon caused “sig­nif­i­cant harm” to the sanc­tions pro­gram.

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

Exxon, in its law­suit, noted that for­mer Pres­i­dent Barack Obama’s ad­min­is­tra­tion had said the sanc­tions strat­egy was to tar­get in­di­vid­u­als like 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 of­fi­cer to at­tend a Ros­neft board meet­ing with Sechin as long as it wasn’t re­lated to 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 law­suit, us­ing an acro­nym to re­fer to the Of­fice of For­eign As­sets Con­trol.

Not so, said the Trea­sury De­part­ment, ar­gu­ing that the govern­ment never gave Exxon or any­one else 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 U.S. said the pres­i­dents of two of Exxon’s sub­sidiaries and 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 Sakhalin oil and nat­u­ral gas project on Rus­sia’s eastern coast.

A photo posted on Ros­neft’s web­site shows Sechin and Duf­fin smil­ing broadly and shak­ing hands at a con­fer­ence ta­ble with doc­u­ments and a pen in front of them. A few days later, 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,” Tiller­son said.

Tiller­son had played a cen­tral role over the years in de­vel­op­ing that multi­bil­lion-dol­lar deal. Tiller­son knew both 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 U.S. sanc­tions. It lev­eled the statu­tory max­i­mum civil penalty of $2 mil­lion for the breaches. Exxon’s suit asks the court to set aside the fine.

Af­ter the Ukraine-re­lated sanc­tions put in place un­der Obama, Tiller­son saw Exxon’s stake in a lu­cra­tive off­shore drilling project with Ros­neft come un­der threat. Tiller­son vis­ited the White House nu­mer­ous times as CEO in the im­me­di­ate af­ter­math of the sanc­tions be­ing an­nounced, but they re­mained in place.

Concerns about Tiller­son’s po­ten­tial con­flict of in­ter­est dom­i­nated his con­fir­ma­tion hear­ings in Jan­uary, and the sec­re­tary has re­cused him­self from mat­ters deal­ing with his for­mer com­pany. The State De­part­ment said it wasn’t in­volved in the de­ci­sion to pun­ish Exxon for vi­o­lat­ing the sanc­tions.

“The sec­re­tary con­tin­ues to abide by his eth­i­cal com­mit­ments, in­clud­ing that re­cusal from Exxon-re­lated com­mit­ments,” said State De­part­ment spokesman Heather Nauert.

As a diplo­mat, Tiller­son has struck a dif­fer­ent tone on sanc­tions and sought to main­tain pres­sure on Rus­sia to stop in­ter­fer­ing in eastern Ukraine.

“The U.S. and EU sanc­tions on Rus­sia will re­main in place un­til Moscow re­verses the ac­tions that trig­gered these par­tic­u­lar sanc­tions,” Tiller­son said ear­lier this month dur­ing a visit to Ukraine.


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