Exxon fights $2 million fine for Russia sanction violation

Exxon Mobil Corp. sued the federal government Thursday to overturn a $2 million fine for violating U.S. sanctions against Russia, calling the penalty “fundamentally unfair” because the guidance was changed after the fact.

The filing came hours after the Treasury Department announced the fine, saying that Exxon under former CEO Rex W. Tillerson, who is now secretary of state, ran afoul of U.S. sanctions by signing contracts in May 2014 with Russian energy giant Rosneft.

The Office of Foreign Assets Control “determined that Exxon Mobil Corp. did not voluntarily self-disclose the violations to OFAC, and that the violations constitute an egregious case,” according to the Treasury Department.

In a statement, Exxon argued that the action was “fundamentally unfair and constitutes a denial of due process under the Constitution and violates the Administrative Procedure Act because market participants, including Exxon Mobil Corp., did not have notice of the interpretation OFAC now seeks to retroactively enforce.”

Mr. Tillerson has recused himself from all matters involving Exxon, State Department spokesperson Heather Nauert told reporters at a Thursday briefing.

“I know we remain very concerned about maintaining sanctions — that will continue,” Ms. Nauert said. “We have been clear that sanctions will continue until Russia does what Russia needs to do We have no change in policy.”

In its complaint, Exxon argued that in May 2014, when the eight documents were signed, “Rosneft was not subject to any sanctions, and no sanctions prohibited the activities called for or reflected in those documents.”

The executive order issued March 17, 2014, provided guidance “that the relevant sanctions applied only to the ’personal assets’ of the sanction individuals and emphasized that the sanctions did not restrict business with the companies those individuals managed.”

“This is contrary to OFAC’s new interpretation of the executive order,” said the Exxon lawsuit.

The $2 million penalty, the maximum allowed, would hardly make a dent in Exxon’s bottom line — the company earned $7.8 billion in 2016 — but the fine adds another layer of intrigue to the ongoing domestic political skirmish over Kremlin influence. In addition, Mr. Tillerson has argued against broad Russian sanctions, calling them ineffective.

The OFAC analysis said that Exxon “caused significant harm to the Ukraine-related sanctions program objectives,” describing the firm as a “sophisticated and experienced oil and gas company that has global operations and routinely deals in goods, services, and technology subject to U.S. sanctions and U.S. export controls.”