The Treasury Department said Friday that it would not issue any waivers to U.S. companies – including ExxonMobil – seeking to do oil and gas drilling with Russia in violation of current economic sanctions.
In a statement that mentioned the company by name, Treasury Secretary Steven Mnuchin said his department had made its decision “in consultation with President Donald J. Trump.”
In July 2015, ExxonMobil had asked the Treasury’s Office of Foreign Asset Control to make an exception to the Russia sanctions, which were imposed after Moscow annexed Ukraine’s Crimea region in early 2014. ExxonMobil had sought to do deep-water exploration drilling in the Russian area of the Black Sea before the end of the year to prevent a joint venture agreement from expiring.
Exxon also argued that rival oil companies in Europe were engaged in drilling in that region.
“We understand the statement today by Secretary Mnuchin in consultation with President Trump,” Exxon Mobil said in a statement Friday afternoon. “Our 2015 application for a license under the provisions outlined in the U.S. sanctions was made to enable our company to meet its contractual obligations under a joint venture agreement in Russia, where competitor companies are authorized to undertake such work under European sanctions.”
The statement is a reference to ENI, the major Italian oil company which has a joint venture in an exploration block right next to ExxonMobil’s in the Tuapsinskiy area of the Russian Black Sea. It is expected that ENI’s Maria 1 well would be drilled before the end of the year, according to a source familiar with the situation but who asked for anonymity because he was not permitted to speak for his company.
On Thursday, ENI said it was not currently drilling in the Black Sea.
The Wall Street Journal first reported that ExxonMobil had sought a sanctions exception, though it was not clear when the permit application was made. On Friday, the company disclosed that the permission was sought long before the outcome of last year’s election or the choice of ExxonMobil chief executive, Rex Tillerson, to be Trump’s Secretary of State.
The U.S. sanctions target Russian leaders close to President Vladimir Putin as well as major companies in the oil, gas and financial sectors to put a dent in the Russian economy. When the sanctions were imposed in 2014, Exxon was in the middle of drilling an exploration well in the Kara Sea in Russia’s Arctic region. The Obama administration granted the company permission to finish the well and withdraw the equipment.
Exxon had also been in the midst of negotiations with Ukraine over drilling offshore in the Skifska block, but that was in an area off Crimea and talks broke off after the Russian annexation.
“Exxon’s request for a waiver for oil exploration in Russia was inconsistent with the original intent of the sanctions put in place by the Obama Administration in retaliation for Russia’s annexation of Crimea, and Treasury’s rejection of the request reflects that,” said Jason Bordoff, the director of the Center on Global Energy Policy at Columbia University.
Any exception to Russia sanctions for Exxon Mobil would be a sensitive issue in light of allegations about Russian interference in the 2016 presidential campaign and since Tillerson was chief executive of the oil giant for a decade. Tillerson has said that he would recuse himself from such decisions.
But the White House and ExxonMobil have, more broadly, often been closely aligned – even releasing press releases containing nearly an entire paragraph in common in March to tout the company’s planned investments in the Gulf Coast region.