ExxonMobil has filed a lawsuit challenging a Treasury Department finding that the company violated international sanctions imposed on Russia in 2014.
The oil company, which now-Secretary of State Rex Tillerson led at the time of the offending incident, accused the Treasury Department's Office of Foreign Assets Control of making an "arbitrary, capricious" finding of fault. Exxon argued that the details it struck with state-run Russian government company Rosneft were permissible even though the chairman of that company was on an international blacklist.
"It relies on a new interpretation by OFAC that had not been announced at the time of the challenged conduct," ExxonMobil lawyers wrote in a federal court filing.
The Treasury Department imposed a $2 million fine on Exxon over the deals, saying that the contracts it signed with Rosneft in May of 2014 represented an "egregious case" of sanctions violations. Rosneft chairman Igor Sechin was a target of international sanctions at the time, prior to the imposition of broader sanctions on Russia's energy industry. "ExxonMobil demonstrated reckless disregard for U.S. sanctions requirements," the Treasury Department said, adding that the company "caused significant harm to the Ukraine-related sanctions program."
Exxon accused the Treasury Department of inventing a new standard for evaluating its deals with Rosneft. Former President Barack Obama's team assured the company that the energy deals were not banned under the sanctions that targeted Sechin personally, the oil giant told the court. "Under the explicit, unambiguous guidance from both the White House and the Treasury Department, the challenged conduct was expressly permitted," the legal filing argues.
Treasury Department officials say that's a weak defense because of "the plain language" of the sanctions. "No materials issued by the White House or the Department of the Treasury asserted an exception or carve-out for the professional conduct of designated or blocked persons, nor did any materials suggest that U.S. persons could continue to conduct or engage in business with such individuals," the department said in a memo on the penalty.
The controversy threatens to embarrass Tillerson, who is trying to forge a diplomatic resolution to the Ukraine crisis. His spokesperson declined to comment on the Treasury Department decision, emphasizing Tillerson's commitment to U.S. government policy. She also blamed Russia for a new outburst of violence that claimed the lives of eight Ukrainian soldiers in eastern Ukraine.
"We call again on Russia and the forces that it arms, trains, and leads in the east, to immediately observe the ceasefire" State Department spokeswoman Heather Nauert told reporters. "We believe that they are so-called ‘separatists,' they're not genuine separatists who are fighting out there on their own regard and their own behalf. These are Russian-led and Russian-backed."