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Exxon has filed a lawsuit challenging the decision and called it “fundamentally unfair.”
According to a penalty filed today by the Treasury Department, the presidents of Exxon’s U.S. subsidiaries in 2014 signed eight agreements for oil and gas projects with Igor Sechin, the president of Russian state-owned oil company Rosneft.
Sechin is a close ally of Russian President Vladimir Putin who previously served as deputy prime minister and has held other high-ranking positions in Putin’s government. He was among those sanctioned by the U.S. after Russia’s occupation of Crimea and incursion into eastern Ukraine.
No one in the State Department was involved in the decision to fine Exxon, according to spokesperson Heather Nauert. Treasury first notified Deputy Secretary of State John Sullivan Wednesday afternoon because Tillerson has recused himself from any decisions regarding his former employer for his first two years as Secretary. Sullivan then notified Tillerson.
Tillerson remains committed to these sanctions, Nauert added, deferring all other questions to Exxon and the Treasury Department.
Exxon signed the agreements between May 14 and May 23, 2014. Tillerson served as CEO from 2006 to 2016 before retiring and joining the Trump administration.
A report by the Treasury Department announcing the penalty singles out the company's top leaders after saying that the company “demonstrated reckless disregard” for the U.S. sanctions against Sechin. “ExxonMobil’s senior-most executives knew of Sechin’s status” on the sanction list when they made the deals, the report says.
Nauert wouldn’t say whether Tillerson was involved in the decision, saying, “I don’t know if that’s the case or not.” But last Wednesday, Tillerson told reporters that at Exxon, “I was the ultimate decision maker.”
Exxon has blasted the penalty as an attempt by Treasury's Office of Foreign Assets Control “to retroactively enforce a new interpretation of an executive order that is inconsistent with the explicit and unambiguous guidance from the White House and Treasury issued before” the agreements were signed. In particular, Exxon says that the documents were signed with Sechin in his “professional” capacity, pointing to a White House fact sheet that March that said, “Our current focus is to identify these individuals and target their personal assets, but not companies that they may manage on behalf of the Russian state.” Treasury said today, however, that no such distinction between professional and private exists and that Exxon should know that.
The Treasury report called the violation “an egregious case” adding, “ExxonMobil caused significant harm to the Ukraine-related sanctions program objectives.”
Exxon has accused the government of changing the rules and said it has no intention of paying the $2 million fine.
The oil giant earned $7.8 billion in 2016.
Exxon applied for a waiver from these same sanctions in April, but the Treasury Department denied them.
Nauert wouldn’t say whether Tillerson would recuse himself from any future Russia sanctions issues given that the company he lead violated them. “Any subsequent conversations that may come down the pike – I’m not going to get ahead of what those might be.”