Exxon fined $2M for Tillerson-era breach of Russia sanctions

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 CEO, the Treasury Department said Thursday. Exxon sued the U.S. government to stop the fine.

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 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 Texasbased company sued Treasury Secretary Steven 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 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 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 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 the former Obama 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 CEO 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.