US fines Exxon $2 mn over sanctions violations

The United States on Thursday hit oil giant ExxonMobil with a $2 million fine for violating Ukraine-related sanctions at a time when Secretary of State Rex Tillerson was still in charge of the company.

The Treasury Department said Exxon had business dealings with Igor Sechin, president of the Russian state energy company Rosneft and a former adviser to Russian President Vladimir Putin, after he was blacklisted under sanctions imposed in the wake of the Russian annexation of Crimea in 2014.

Treasury's Office of Foreign Assets Control, the principal agency overseeing US sanctions programs, said Exxon's actions had caused "significant harm" to the Ukraine sanctions program and the company's "senior-most executives" were aware of the activity.

The violations "constitute an egregious case" and the company showed "reckless disregard" for US rules, the office said in a statement.

Two US subsidiaries of Exxon signed eight legal documents with Sechin in May 2014 for oil and gas projects in Russia, after he was included in the sanctions in late April, according to OFAC.

- Legal challenge -

Just hours after the decision was announced, Exxon launched a legal challenge against the "fundamentally unfair" fine, saying it had received guidance that the nature of its dealings with Sechin would not violate the sanctions.

"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 issued before the relevant conduct and still publicly available today," the company said in filing in the US District Court, according to a statement.

Exxon's statement included a list of media reports in which US officials said the sanctions targeted individuals, not companies.

But OFAC said the regulations made no such distinction and Exxon should have known it would be legally barred from entering into agreements with Rosneft that were countersigned by Sechin.

"No materials issued by the White House or the Department of the Treasury asserted an exception or carve-out for the professional conduct of designated or blocked persons, nor did any materials suggest that US persons could continue to conduct or engage in business with such individuals," OFAC said.

Tillerson stepped down as chief executive of Exxon in 2016 to serve as the Trump administration’s secretary of state but his nomination was immediately contentious given his history of ties to the Kremlin.

- Not backing away from sanctions -

Exxon had billions at stake due to US sanctions on Russia, but Tillerson said in March the sanctions would remain in place until Russia returned Crimea to Ukraine.

The State Department said Thursday that Tillerson remained committed to the goals of the sanctions program and that he had recused himself from all Exxon-related matters.

"The secretary continues to abide by his ethical commitments, including that recusal," State Department Spokeswoman Heather Nauert told reporters. "The sanctions are in place. We are not backing away from these sanctions."

She declined to answer questions about Tillerson's possible role in or knowledge of the sanctions violations.

Meanwhile, Rosneft spokesman Mikhail Leontyev called the case "astonishing" but said he believed the 2014 deals remained in effect.

"We need to proceed on the basis that they received absolute assurances that these actions were fully lawful," he told Kommersant FM radio.

In April, the Treasury Department also dealt a Russia-related blow to Exxon, refusing to grant a waiver that would have allowed drilling in the Black Sea.

The White House remains mired in controversy over the Trump campaign's connections to Russian authorities, with one of Trump's sons and his former campaign manager due to testify before Congress next week about contacts with Kremlin-linked individuals during the presidential campaign.