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Friday
Jul212017

OFAC fines Exxon $2 million for violating Russia sanctions, Exxon sues

The Treasury Department's Office of Foreign Assets Control fined Exxon Mobil Corp. $2 million Thursday for signing a joint venture with Russia's Rosneft in "reckless disregard" of Ukraine-related trade sanctions.

In response, Exxon filed a lawsuit in federal court in Texas, arguing that it had guidance from the government that its action would be legal under existing law and OFAC rules.

In May 2014, Texas-based Exxon signed the deal with Rosneft, Russia's biggest oil company. A few weeks earlier, OFAC had announced trade sanctions against Russia for annexing the Crimea region of Ukraine.

OFAC said Thursday that Exxon executives signed eight documents with Igor Sechin, the head of state-run Rosneft, after OFAC listed him as a "blocked" person under the sanctions.

"ExxonMobil demonstrated reckless disregard for U.S. sanctions requirements when it failed to consider warning signs associated with dealing" in blocked services by Sechin, OFAC said.

OFAC said an "aggravating factor" was that "ExxonMobil's senior-most executives knew of Sechin's status" as a blocked person under the sanctions. 

Exxon's violations "caused significant harm to the Ukraine-related sanctions program objectives by engaging the services" of Sechin, OFAC said.

In its lawsuit against OFAC, Exxon said the fine was arbitrary and capricious. 

ExxonMobil is the world's largest publicly traded international oil and gas company. Last year the company earned $7.8 billion on revenues of about $219 billion.

Reuters said Exxon argued in the lawsuit that Sechin "was subject to sanctions only in his individual capacity."

The company said guidance from the Obama administration was that the sanctions applied only to the personal assets of sanctioned individuals and didn't restrict doing business with companies they managed.

The lawsuit is Exxon Mobil Corp. v. Steve Munchin, et al, U.S. District Court, North District of Texas, No. 3:17-cv-1930.

OFAC's July 20, 2017 Enforcement Information is here.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.