Exxon fined $2M for Tillerson-era breach of Russia sanctions

FILE - In this Nov. 7, 2016, file photo, ExxonMobil CEO and chairman Rex W. Tillerson gives a speech at the annual Abu Dhabi International Petroleum Exhibition & Conference in Abu Dhabi, United Arab Emirates. The Treasury Department hit Exxon Mobil Corp. with a $2 million fine on July 20, 2017, for violating Russia sanctions while 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. (AP Photo/Jon Gambrell, File)
FILE - In this Nov. 7, 2016, file photo, ExxonMobil CEO and chairman Rex W. Tillerson gives a speech at the annual Abu Dhabi International Petroleum Exhibition & Conference in Abu Dhabi, United Arab Emirates. The Treasury Department hit Exxon Mobil Corp. with a $2 million fine on July 20, 2017, for violating Russia sanctions while 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. (AP Photo/Jon Gambrell, File)

WASHINGTON (AP) - Exxon Mobil Corp. showed "reckless disregard" for U.S. sanctions on Russia while Secretary of State Rex Tillerson was the oil giant's CEO, the Treasury Department said Thursday. The U.S. fined the company $2 million.

Treasury said Exxon violated sanctions when it signed contracts in May 2014 with Russian oil magnate Igor Sechin, chairman of government-owned energy giant Rosneft. The U.S. blacklisted Sechin, Tillerson's longtime business associate, as part of its response to Moscow's actions in Ukraine and annexation of Crimea.

The same month that Exxon signed the deals, Tillerson said the company generally opposes sanctions and finds them "ineffective."

As America's top diplomat, Tillerson has insisted the sanctions will stay in place until Russia reverses course in Ukraine and gives back Crimea. Still, the sanctions breach on his watch raises significant questions about his ability to credibly enforce the sanctions and to persuade European countries to keep doing so.

Exxon, in a statement, countered it had done nothing wrong and complained the fine was unfair. The State Department wouldn't comment on Tillerson's role.

Yet the Treasury Department said Exxon's "senior-most executives" knew Sechin was blacklisted when two of its subsidiaries signed deals with him. The Office of Foreign Assets Control, or OFAC, said Exxon caused "significant harm" to the sanctions program by engaging in transactions with a Russian government official contributing to the Ukraine crisis.

The dispute between Exxon and the government stems from a disagreement about whether the sanctions differentiated between "professional" and "personal" interactions with Sechin, who had been blacklisted only weeks earlier.

Maintaining its innocence, Exxon said "clear guidance" from the White House and Treasury Department had indicated only engaging with Sechin in a personal capacity was prohibited. It noted that Rosneft was not subject to sanctions at the time.

Not so, said the Treasury Department, arguing the government never gave Exxon or anyone else a reason to believe there was an exception for professional dealings. The government noted its website at the time explicitly warned companies not to enter any contracts signed by people on the blacklist.

The U.S. said the presidents of two Exxon's subsidiaries and Sechin had signed eight legal documents in May 2014. That same month, Neil Duffin, president of subsidiary Exxon Mobil Development, signed several deals to continue their work on the massive Sakhalin oil and natural gas project on Russia's eastern coast.

A photo posted on Rosneft's website shows Sechin and Duffin smiling broadly and shaking hands at a conference table with documents and a pen in front of them. A few days later, Tillerson was unambiguous about Exxon's opposition to the sanctions during his company's annual meeting.

"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.

Tillerson had played a central role over the years in developing that multibillion dollar deal. Tillerson knew both Sechin and Russian President Vladimir Putin for more than a decade before he became secretary of state.

The Treasury Department called the violation an "egregious case" and noted that Exxon "is a sophisticated and experienced oil and gas company that has global operations" and should know better when it comes to U.S. sanctions. It leveled the statutory maximum civil penal of $2 million for the breaches.

In its statement, Exxon maintained its innocence, saying that the government was "trying to retroactively enforce a new interpretation of an executive order."

"OFAC's action is fundamentally unfair," the company said.

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 in the immediate aftermath of the sanctions being announced, but they remained in place.