When Rex Tillerson ran ExxonMobil, he made his name making deals in Russia, which in turn made Donald Trump’s decision to appoint him as secretary of State contentious. Skepticism about Vladimir Putin’s authoritarian state and its connections to the highest levels of the Trump administration dogged his confirmation hearings.
Now, it turns out at least some of those Russia deals made while he was CEO broke US law. The sanctions cops at the US Treasury Department have levied a fine of $2 million (pdf) on ExxonMobil for violating sanctions put in place to punish Russia’s invasion of Ukraine in 2014.
That fine is, of course, a tiny drop in the ocean of Exxon’s petroleum profits of $7.8 billion last year. The violations hinge on some awkward timing. The US issued an executive order in March 2014, forbidding “the receipt of any contribution or provision of funds, goods, or services” from someone on the sanctions list. Igor Sechin, a Putin crony who earned the moniker “Darth Vader” for his forbidding style, was added to that list in April. In May, ExxonMobil signed a series of agreements with Sechin, who was acting in his capacity as the president of Rosneft, the Russian state oil firm.
This was a no-no. The Office of Foreign Assets Control (OFAC), which enforces sanctions, called the deal an “egregious case” that showed “reckless disregard” for US sanctions.
In a statement issued today, Exxon said the action is “fundamentally unfair,” and that it would file a legal challenge to overturn OFAC’s judgement.
Exxon said that the sanctions were aimed at Sechin’s personal wealth, not at Rosneft; it notes that a British oil company’s American CEO was allowed to attend board meetings with Sechin and that White House officials described the sanctions as an effort to target individuals, not companies. OFAC, on the other hand, said in its statement that it doesn’t recognize “an exception or carve-out for the professional conduct of designated or blocked persons,” and that the only thing that matters is the letter of the law.
OFAC also noted that “ExxonMobil’s senior-most executives knew of Sechin’s status as [a sanctioned individual] when they dealt in the blocked services of Sechin.” ExxonMobil’s senior-most executive at that time was Tillerson.
The next month, Tillerson was asked about sanctions by the Associated Press and said “there has been no impact on any of our business activities in Russia to this point, nor has there been any discernible impact on the relationship. The organizations continue to work business as usual.”
Rosneft was crucial to Exxon. In 2011, Exxon had begun working with the Russian firm in a $600 million deal to exploit Russian shale oil reserves. That represented an important gain in Exxon’s long-running battle to replenish its oil reserves, the key to the long-term survival of its business. The 2014 sanctions were a big obstacle to its success.
Three years later, during his confirmation hearing, Tillerson told senators that “to my knowledge, Exxon never directly lobbied against sanctions.” Politifact rated this statement “mostly false,” since Exxon had in fact paid a lobby group to lobby on the issue and Tillerson had spoken publicly of making Exxon’s opposition to sanctions known “at the highest levels.”
This piece was updated with news of ExxonMobil’s decision to challenge OFAC’s ruling.