The Cable

Treasury Fines ExxonMobil for Tillerson-Era Russia Sanctions Violation

The optics might not be great, but the oil giant can shrug off the relatively small monetary fine.

Russia's Prime Minister Vladimir Putin (L) speaks with ExxonMobil President and Chief Executive Officer Rex Tillerson during the signing of a Rosneft-ExxonMobil strategic partnership agreement in Sochi on August 30, 2011. Russia's oil champion Rosneft and US ExxonMobil clinched a global deal worth up to half-a-trillion dollars that will see the US supermajor take BP's place in pioneering Arctic exploration work.  AFP PHOTO / RIA NOVOSTI / POOL / ALEXEY DRUZHININ (Photo credit should read ALEXEY DRUZHININ/AFP/Getty Images)
Russia's Prime Minister Vladimir Putin (L) speaks with ExxonMobil President and Chief Executive Officer Rex Tillerson during the signing of a Rosneft-ExxonMobil strategic partnership agreement in Sochi on August 30, 2011. Russia's oil champion Rosneft and US ExxonMobil clinched a global deal worth up to half-a-trillion dollars that will see the US supermajor take BP's place in pioneering Arctic exploration work. AFP PHOTO / RIA NOVOSTI / POOL / ALEXEY DRUZHININ (Photo credit should read ALEXEY DRUZHININ/AFP/Getty Images)

The U.S. Department of Treasury has slapped a $2 million fine on oil and gas giant ExxonMobil for violating U.S. sanctions on Russia back in 2014. That happened to be when Secretary of State Rex Tillerson was in charge of the company.

According to Treasury’s Office of Foreign Assets Control (OFAC), ExxonMobil violated Ukraine-related sanctions in May 2014 by “by signing eight legal documents related to oil and gas projects in Russia with Igor Sechin,” a close ally of Russian President Vladimir Putin and chief of Rosneft, the country’s shady majority state-owned oil company.

Tillerson’s company showed “reckless disregard” for U.S. sanctions on Russia and “caused significant harm” to Ukraine-related sanctions, according to an OFAC document released Thursday describing the fine.

“OFAC determined that ExxonMobil did not voluntarily self-disclose the violations to OFAC and that the violations constitute an egregious case,” the document says.

Two million dollars comes as something less than a slap on the wrist for a company that posted $7.8 billion in earnings last year, but ExxonMobil nevertheless pushed back against the fine, calling Treasury’s decision a “fundamentally unfair” misreading of the 2014 sanction guidelines. In fact, the company is already contesting the fine in federal court, contending that the sanctions in question applied to Sechin individually and not in his capacity as Rosneft president.

But optics-wise, the fine looks bad for ExxonMobil and worse for Tillerson. (Particularly with the administration’s other Russia-related kerfuffles). The State Department declined FP’s request for comment.

In April of this year, ExxonMobil petitioned the Treasury Department for the right to bypass U.S. sanctions on Russia in order to kickstart a drilling project with Rosneft in the Black Sea. Treasury Secretary Steven Mnuchin quickly denied the company’s request.

As ExxonMobil CEO, Tillerson informed shareholders in 2014 that “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.” During his nomination hearings, he assured the Senate, “Exxon Mobil never lobbied against the sanctions,” though the Wall Street Journal found that dozens of lobbying disclosure forms tell a different story.

As Secretary of State, Tillerson has poured cold water on Congressional proposals to further sanction Russia. Appearing before the House Foreign Affair Committee last month, Tillerson cautioned, “I would urge… allowing the president the flexibility to adjust sanctions to meet the need in what is always an evolving diplomatic situation.”

Last week, the Secretary of State flew to Istanbul, where he received a lifetime achievement award from the World Petroleum Council, an oil and gas industry forum. “I miss all of you,” Tillerson told his former colleagues.

Update, July 20, 2017: This story has been updated to include the facts of ExxonMobil’s legal challenge to OFAC.

Photo Credit: ALEXEY DRUZHININ / AFP / Getty Images

Robbie Gramer is a diplomacy and national security reporter at Foreign Policy. @robbiegramer

Noah Buyon is a digital intern.

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