Exxon fined $2.7m for violating sanctions on Russia

(From left) Rosneft head Igor Sechin, Russia President Vladimir Putin and former ExxonMobil chief executive Rex Tillerson at a signing ceremony at a Rosneft refinery in the Black Sea town of Tuapse, Russia, on June 15, 2012. Mr Tillerson, who is the
(From left) Rosneft head Igor Sechin, Russia President Vladimir Putin and former ExxonMobil chief executive Rex Tillerson at a signing ceremony at a Rosneft refinery in the Black Sea town of Tuapse, Russia, on June 15, 2012. Mr Tillerson, who is the current US Secretary of State, faces concerns over his deep business connections in Russia.PHOTO: REUTERS

Violation occurred while Tillerson, now Secretary of State, was oil company's chief executive

WASHINGTON • The Treasury Department fined ExxonMobil US$2 million (S$2.7 million) on Thursday for violating sanctions that the United States imposed on Russia in 2014 while Mr Rex Tillerson, now the Secretary of State, was the oil company's chief executive.

The penalty is relatively small for the Treasury and a blip on Exxon's mammoth balance sheet, but it came as controversy over Russia policy has engulfed Washington. The Trump administration is facing questions about Russia's intervention in last year's election, and Congress has considered stiffening sanctions out of concern that President Donald Trump will try to ease those already in place.

The move also underscores concerns over Mr Tillerson's deep business connections in Russia.

"ExxonMobil demonstrated reckless disregard for US sanctions requirements," the Treasury said in a report announcing the penalty. "ExxonMobil caused significant harm to the Ukraine-related sanctions programme."

Mr Hal Eren, a former official in the Treasury's Office of Foreign Assets Control (OFAC), said the fine showed that the department's staff would not be cowed.

"It gives the message that they're going to do what they have to even though Rex Tillerson is Secretary of State," he said. "Perhaps it was a bit of assertion of independence by the staff of OFAC."

The State Department declined to comment on the penalty and referred questions to Exxon.

In a statement, Exxon called the penalty "fundamentally unfair". The company also filed a lawsuit against the Treasury challenging the fine.

Exxon violated sanctions imposed after Russia's armed actions against Ukraine when presidents of the company's US subsidiaries did business with individuals whose assets were blocked, according to the foreign assets control unit.

The violations involved the signing of legal documents related to oil and gas projects in Russia with Mr Igor Sechin, the head of Rosneft, the Russian state oil company, and another person.

Mr Tillerson had personal business dealings with Mr Sechin. In 2013, Mr Tillerson was awarded the Russian government's Order of Friendship after he signed deals with Rosneft that opened the Kara Sea in the Arctic to oil drilling.

Mr Tillerson was the only US official to join Mr Trump at a meeting with President Vladimir Putin of Russia at the Group of 20 summit meeting in Germany this month.

Relations between the United States and Russia have been strained by allegations of election meddling and by subsequent inquiries into Mr Trump's campaign. The President has signalled a continuing desire to improve relations, and he recently praised the brokering of a ceasefire in part of Syria as the fruit of his rapport with Mr Putin.

US and European sanctions were imposed on Russia in March 2014 after Moscow annexed Crimea from Ukraine. Even as the crisis in Ukraine deepened, Exxon continued to press for deeper involvement in Russia's oil industry.

Mr Tillerson expressed opposition to the sanctions before they were tightened in late 2014.

At Exxon's annual meeting in 2014, he said: "We do not support sanctions, generally, because we don't find them to be effective unless they are very well implemented comprehensively, and that's a very hard thing to do."

The company said that it had adhered to guidance from the White House and the Treasury, and that its representatives had done nothing wrong by signing documents related to active business with Rosneft, which was not blocked by sanctions. Mr Sechin was acting in an official capacity, Exxon said, not a personal one.

A Treasury official said the penalty came after a multi-year investigation.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on July 22, 2017, with the headline 'Exxon fined $2.7m for violating sanctions on Russia'. Print Edition | Subscribe