WASHINGTON—The Treasury Department hit Exxon Mobil Corp. with a $2 million fine July 20 for violating Russia sanctions while Secretary of State Rex Tillerson was the oil company’s CEO.
Treasury said in a statement that Exxon under Tillerson’s leadership had shown “reckless disregard” for sanctions that the Obama administration imposed on Russian entities in 2014 over Russia’s annexation of Crimea. And, it said the company’s “senior-most executives” were aware of the sanctions when two of its subsidiaries signed deals with Russian oil magnate Igor Sechin. Sechin is the chairman of Russian oil giant Rosneft and is on a U.S. blacklist that bars Americans from doing business with him.
In a statement, Exxon countered that it had done nothing wrong and complained that the fine was “fundamentally unfair.” The State Department declined to comment on Tillerson’s role, referring all questions to Exxon.
Treasury’s Office of Foreign Assets Control, or OFAC, said Exxon caused “significant harm” to the sanctions program by engaging in transactions with a person who is “an official of the government of the Russian Federation contributing to the crisis in Ukraine.”
OFAC said it had considered and rejected Exxon’s explanation that it had believed from press accounts of the sanctions that there was a distinction between Sechin acting in a “professional” rather than a “personal” capacity. It also determined that Exxon had not voluntarily disclosed the violations, which it said was “an egregious case.” It levelled the statutory maximum civil penal of $2 million for the breaches.
In its statement, Exxon maintained its innocence, saying that it had “followed clear guidance” from the White House and Treasury Department when it went ahead with the deals with Rosneft that Sechin then countersigned. It noted that Rosneft was not subject to sanctions at the time and maintained it understood transactions with Sechin in his personal capacity as an individual were not covered.
“Based on the enforcement information published today, OFAC is trying 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,” it said. “OFAC’s action is fundamentally unfair.”
OFAC said it considered several aggravating factors when reaching its decision. Those included “reckless disregard for U.S. sanctions requirements when it failed to consider warning signs associated with dealing in the blocked services of (a sanctioned person), that ”Exxon Mobil’s senior-most executives knew of Sechin’ s status … when they dealt in the blocked services of Sechin,“ that the deals ”caused significant harm to the Ukraine-related sanctions program objectives“ and that the company ”is a sophisticated and experienced oil and gas company that has global operations and routinely deals in goods, services and technology subject to U.S economic sanctions and U.S. export controls.“
Tillerson has taken a tough line with Ukraine-related sanctions as secretary of state, saying earlier this month on a trip to Kyiv that the sanctions would not be lifted until Russia met its obligations.
But while he was at Exxon, Tillerson opposed the sanctions levied on Moscow for its annexation of Crimea. Those sanctions cost his company hundreds of millions of dollars.
The same year that Exxon is accused of breaching the sanctions, Tillerson was unambiguous about his opposition to the penalties.
“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 at Exxon’s 2014 annual meeting.
Sechin was Tillerson’s main partner in Exxon’s bid to drill in the Arctic’s Kara Sea, with its vast untapped potential. Tillerson knew both Sechin and Russian President Vladimir Putin for more than a decade before he became secretary of state.
After the Ukraine-related sanctions put in place under President Barack 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 to protest the sanctions, but they remained in place.