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Exxon Mobil Sues U.S. Over Penalty For Post-Sanctions Russian Deal

Rex Tillerson when he was CEO of Exxon Mobil

WASHINGTON -- American oil giant Exxon Mobil pushed back against what it called a “fundamentally unfair” penalty announced by the U.S. Treasury on July 20 for violating U.S. sanctions on Russia just weeks after they were imposed in 2014.

Exxon sued the government in a bid to block a $2 million fine for allegedly violating the sanctions in May 2014, shortly after then-President Barack Obama announced he was imposing them in response to Moscow's annexation of Ukraine's Crimea Peninsula.

The sanctions targeted, among others, Igor Sechin, the chief executive of the Russian state-controlled oil company Rosneft. Exxon at the time was run by Rex Tillerson, who resigned as the company's chief executive this year when he become U.S. Secretary of State.

There was no immediate comment from the State Department on the decision, or what role Tillerson had in signing off on the disputed transactions as the company’s CEO.

In its announcement, the Treasury Department said U.S. subsidiaries of Exxon Mobil "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 Igor Sechin."

Exxon showed “reckless disregard for U.S. sanctions requirements," it said.

The $2 million fine appears to be a mainly symbolic move against Exxon Mobil, which brought in $7.8 billion in revenue last year.

In a statement e-mailed to RFE/RL, Exxon Mobil took exception to the accusations, saying at the time of the alleged violations the company had gotten guidance from the government about whether some transactions would violate the sanctions.

The company said later it had filed suit in federal court in Texas, seeking to block the action and accusing the Treasury Department’s Office of Foreign Assets Control of trying “retroactively enforce” an earlier order.

The finding is “fundamentally unfair and constitutes a denial of due process under the Constitution and violates the Administrative Procedure Act because market participants, including Exxon Mobil, did not have notice of the interpretation [it] now seeks to retroactively enforce,” the lawsuit charged.

In an earlier statement, William Holbrook, a company spokesman, said that the Exxon Mobil had followed “clear guidance from the White House and Treasury Department when its representatives signed documents involving ongoing oil and gas activities in Russia with Rosneft -- a nonblocked entity -- that were countersigned on behalf of Rosneft by CEO Igor Sechin in his official representative capacity.”

In Moscow, Rosneft spokesman Mikhail Leontiev questioned why the Treasury was moving now to punish Exxon Mobil, asserting that contractual documents in dispute have been publicly available for more than three years.

“And, knowing how Exxon Mobil operates, it’s impossible to understand how the company, concluding some sort of deal connected with one or another U.S. sanctions, did not receive exhaustive guidance from the [Treasury] lawyers that they were operating properly with regards to the U.S. sanctions,” Leontiev was quoted by the state news agency TASS as saying.

The question of sanctions imposed on Russia has become increasingly fraught under President Donald Trump, who has repeatedly suggested they might be lifted or softened.

The Senate has moved to cement the existing sanctions in place, by requiring congressional approval if Trump seeks to lift them, though that legislation has stalled in the House of Representatives.

During his confirmation hearings in the Senate in January, Tillerson said he favored maintaining sanctions against Russia for the time being. But during a separate appearance last month before the Senate Foreign Relations Committee, he asked lawmakers not to cement the existing sanctions, arguing that the administration needed flexibility to negotiate with Moscow.

In April, Exxon Mobil sought from the Treasury Department a waiver from the sanctions so it could drill in the Black Sea in a venture with Rosneft. Treasury, however, denied the request.

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    Mike Eckel

    Mike Eckel is a senior correspondent reporting on political and economic developments in Russia, Ukraine, and around the former Soviet Union, as well as news involving cybercrime and espionage. He's reported on the ground on Russia's invasion of Ukraine, the wars in Chechnya and Georgia, and the 2004 Beslan hostage crisis, as well as the annexation of Crimea in 2014.