The U.S. Department of the Treasury announced yesterday that it will fine ExxonMobil $2 million for violating U.S. sanctions imposed on Russia after the country's military intervention in Ukraine. According to Treasury officials, presidents of ExxonMobil’s subsidiaries signed eight legal documents with the intention to develop oil and gas projects across Russia. The agreements were reached with Igor Senchin, President of Rosneft OAO, a Moscow-based energy company that reportedly had revenues of almost $65 billion last year.
The problem is the agreements between ExxonMobil and Rosneft were finalized almost two months after the Obama White House issued sanctions, which included business dealings with certain statesmen believed to be involved in the military interventions. Senchin was one of many Russian officials identified on a Treasury Department list as a “Specially Designated National,” or SDN. Treasury Department officials block these individuals’ assets whenever possible, and they are almost always prohibited from dealing with American citizens.
The sanctions came via executive order because Russia’s intervention in Ukraine resulted in many human rights crises.
But ExxonMobil went right ahead and closed business deals anyway.
The company argued that the agreements reached with Senchin and Rosneft were more of a “personal” rather than “professional” nature, but the Treasury Department begs to differ, retorting that the executive order covering the sanctions offered no such distinctions. “ExxonMobil demonstrated reckless disregard for U.S. sanctions requirements when it failed to consider warning signs associated with dealing in the blocked services of an SDN,” said a Treasury Department statement explaining the financial penalty it levied against the oil giant.
Furthermore, the Treasury Department described ExxonMobil’s conduct as “egregious,” and criticized the company for not revealing these dealings when disclosing information to the department’s Office of Foreign Assets Control (OFAC).
The timing of yesterday's announcement arrived six months to the day after Donald Trump was inaugurated, while his administration suffers through one of its worst weeks, politically. The failure of the U.S. Senate to pass any health care bill was unsettling enough for Trump and his allies. Then the President’s eye-popping interview with the New York Times, in which he admitted he would not have chosen loyalist Jeff Sessions as Attorney General if he has known the former Alabama senator would have recused himself from overseeing the Justice Department’s Russia investigation. This claim earned Trump plenty of rebuke from right-leaning commentators.
The fine imposed on ExxonMobil is also a black eye for Secretary of State Rex Tillerson, who was CEO of the company at the time those illegal oil and gas agreements were reached. Although environmentalists, as well as critics of Trump in general, protested Trump’s selection of Tillerson as Secretary of State, the former CEO has been viewed as one of the more “level-headed” and low-key leaders within the current administration; and observers say he often lends a sense of gravitas and professionalism that analysts say is missing from the White House.
Shortly after the Treasury Department publicly revealed ExxonMobil’s fine, the company announced that it would legally challenge the ruling. “OFAC’s action is fundamentally unfair and constitutes a denial of due process under the Constitution,” said the company in a filing submitted to a U.S. district court in northern Texas, “because market participants, including ExxonMobil, did not have notice of the interpretation OFAC now seeks to retroactively enforce.”
ExxonMobil argues that although the sanctions were announced in March 2014 and ExxonMobil’s contracts were signed two months later, the company claims the Obama Administration and OFAC still had not formulated a clear policy governing the sanctions against Russia in July of that year - and did not notify ExxonMobil about any potential violations until a year later.
The $2 million-dollar fine is the maximum civil penalty for such violations, and that level of severity could help support ExxonMobil’s allegations that the amount is “fundamentally unfair.” Of course, as Devin Henry of The Hill points out, that is a relative pittance for ExxonMobil, which reaped $7.8 billion in profits last year.
ExxonMobil’s claim that there was a lack of clarity over the Russia sanctions induces some head-scratching. A company with as deep of a well of legal representation and advice as ExxonMobil should know better – and meanwhile, the company has expressed publicly that it has long been keen on ensuring its operations are both ethical and compliant. “We expect our employees, officers and directors to comply with all applicable laws and regulations and seek to work with suppliers and business partners who share our commitment to human rights,” the company announced in its most corporate citizenship report.
Image credit: CSIS/Flickr
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.