Exxon fined for violating U.S. sanctions while Tillerson was CEO

WASHINGTON — The Treasury Department on Thursday fined Exxon Mobil $2 million for violating sanctions that the United States imposed on Russia in 2014 while Rex Tillerson, now the secretary of state, was the oil company's chief executive.

The penalty was relatively small for the Treasury and a blip on Exxon's mammoth balance sheet, but it came as controversy over Russia policy has engulfed Washington. The Trump administration is facing questions about Russia's intervention in the 2016 election, and Congress has considered stiffening sanctions out of concern that President Donald Trump will try to ease those already in place.

The move also underscores concerns over Tillerson's deep business connections in Russia.

"Exxon Mobil demonstrated reckless disregard for U.S. sanctions requirements," the Treasury said in a report announcing the penalty. "Exxon Mobil caused significant harm to Ukraine-related sanctions program."

Hal Eren, a former official in Treasury's Office of Foreign Assets Control, said the fine showed that the department's staff members would not be cowed.

"It gives the message that they're going to do what they have to even though Rex Tillerson is secretary of state," he said. "Perhaps it was a bit of assertion of independence by the staff of OFAC"

Exxon violated sanctions imposed after Russia's armed actions against Ukraine when presidents of the company's U.S. subsidiaries did business with individuals whose assets were blocked, according to the foreign assets control unit. The violations involved the signing of legal documents related to oil and gas projects in Russia with Igor Sechin, the head of Rosneft, the Russian state oil company, and another person.

Tillerson had personal business dealings with Sechin. In 2013, Tillerson was awarded the Russian government's Order of Friendship after he signed deals with Rosneft that opened the Kara Sea in the Arctic to oil drilling.

Tillerson was the only U.S. official to join Trump at a meeting with President Vladimir Putin of Russia at the Group of 20 summit meeting in Germany this month.

Relations between the United States and Russia have been strained by the allegations of election meddling and by the subsequent inquiries into Trump's campaign. The president has signaled a continuing desire to improve relations, and he recently praised the brokering of a cease-fire in part of Syria as the fruit of his rapport with Putin.

U.S. and European sanctions were imposed on Russia in March 2014 after Moscow annexed Crimea from Ukraine. Even as the crisis in Ukraine deepened, Exxon continued to press for deeper involvement in Russia's oil industry.

Tillerson expressed opposition to the sanctions, before they were tightened in late 2014. At Exxon's annual meeting in 2014, he said, "We do not support sanctions, generally, because we don't find them to be effective unless they are very well implemented comprehensively, and that's a very hard thing to do."

The State Department declined to comment on the penalty and referred questions to Exxon.

In a statement, Exxon called the penalty "fundamentally unfair." The company also filed a lawsuit against the Treasury challenging the fine.

The company said that it had adhered to guidance from the White House and the Treasury, and that its representatives had done nothing wrong by signing documents related to active business with Rosneft, which was not blocked by sanctions. Sechin was acting in an official capacity, Exxon said, not a personal one.

In its suit, Exxon argues that the Treasury penalty is out of sync with the guidance that the department and the White House provided when the sanctions were announced. The company also notes that BP's American chief executive was allowed to participate in Rosneft board meetings with Sechin so long as the activity involved Rosneft business and not Sechin's personal business.

A Treasury official said the penalty came after a multiyear investigation.

It was not the first time in recent months that Exxon had drawn attention for its handling of the Russia sanctions. In April, the company asked the Treasury for a waiver from sanctions against Russia so it could drill in the Black Sea in a venture with Rosneft, stirring speculation that Exxon hoped to influence the administration through its ties to Tillerson. That request was denied.

There were signs Thursday that the penalty could energize the push in Congress for tougher sanctions against Russia.

"I am disappointed that an American company would so clearly act in divergence from U.S. national security interests," said Sen. Ben Cardin, D-Md. "Today's news only underscores the urgency for new sanctions on Russia that increase pressure on the country and tighten loopholes in existing sanctions."