US Fines Exxon $2mn for Sechin Contacts under Tillerson
ExxonMobil has been fined $2mn by the US Treasury Department for violations of sanctions against Russia; the US supermajor has said it will appeal.
The case highlights a delicate area, as the charges concern events in 2014 when ExxonMobil was run by Rex Tillerson, who is now the US Secretary of State in Donald Trump’s administration.
Exxon and Rosneft in 2012 formed a joint venture to develop offshore oil and gas reserves in the Arctic's Kara Sea and in the Black Sea.
The Treasury’s Office of Foreign Assets Control (Ofac) said July 20 that, between on or about May 14, 2014 and on or about May 23, 2014, ExxonMobil violated paragraph 589.201 of the Ukraine-Related Sanctions Regulations when the presidents of its US subsidiaries dealt in services of an individual whose property and interests in property were blocked, namely, by signing eight legal documents related to oil and gas projects in Russia with Rosneft CEO Igor Sechin who is on Ofac’s List of Specially Designated Nationals and Blocked Persons.
Sechin was Russian deputy prime minister from 2008 to 2012, when the current president Vladimir Putin was prime minister, and the two remain close.
The regulations were introduced in the wake of Russia’s 2014 annexation of Crimea and its continuing occupation of parts of eastern Ukraine. Ofac said it “determined that ExxonMobil did not voluntarily self-disclose the violations to Ofac, and that the violations constitute an egregious case.”
ExxonMobil countered July 20 that it has launched a legal challenge to Ofac's finding, saying the company “followed authoritative and specific guidance from the Obama administration that Ofac retroactively changed a year later.”
ExxonMobil said that a filing it has submitted July 20 to a US District Court in Dallas, Texas, said that Ofac’s action is “fundamentally unfair and constitutes a denial of due process under the Constitution and violates the Administrative Procedure Act because market participants, including ExxonMobil, did not have notice of the interpretation Ofac now seeks to retroactively enforce.”
The supermajor says that a Treasury official said in May 2014, by way of example, that BP’s US CEO was permitted to participate in Rosneft board meetings with Sechin so long as the activity related to Rosneft’s business and not Sechin’s personal business.
“ExxonMobil followed the clear guidance from the White House and Treasury Dept when its representatives signed documents involving ongoing oil and gas activities in Russia with Rosneft – a non-blocked entity – that were countersigned on behalf of Rosneft by Sechin in his official capacity. At the time of the signing, those activities themselves were not under any direct sanction by the US government,” said the company’s July 20 statement.
There were no official comments from Tillerson's office July 20 other than his official national day greetings to the peoples of Colombia and Belgium - the latter falling on July 21.
Exxon and Rosneft began drilling in the Kara Sea in 2014 but suspended drilling in 2015. The US Treasury Dept in April 2017 refused to give waivers to US companies including Exxon to resume activities in Russia covered by the 2014 sanctions.
Mark Smedley