The U.S. Treasury Department rejected Exxon’s request to let the oil giant work with a Russian state-run energy company to drill in the Black Sea, despite existing U.S. sanctions preventing them from doing so. The Wall Street Journal first reported last week that Exxon filed a waiver application with the Treasury Department requesting to be exempt from sanctions levied against Russia. On Friday, Treasury Secretary Steve Mnuchin said in a statement that the government will not grant such exemptions to U.S. companies so long as the sanctions on Russia are intact, according to CNBC.
Exxon’s Russian drilling ambitions are no secret. The Dallas-based company has long had its sights set on Russian-controlled areas in the Arctic, Siberia, and the Black Sea, and it inked a huge deal in 2012 with Moscow-owned oil giant Rosneft, allowing an offshore exploration partnership to develop oil fields in those areas. But the deal was stymied by sanctions stemming from Russia’s annexation of Crimea in 2014, which barred U.S. entities from working with Rosneft. Exxon was able to secure a waiver in 2014 allowing it to continue working with Rosneft in the Arctic, but a waiver request in July 2015 to work in the Black Sea was rejected. The sanctions reportedly cost Exxon about $1 billion.
The timing of Exxon’s request was interesting for a few reasons. According to the Journal, Exxon began its renewed push for a waiver to work in the Black Sea in March, not long after former Exxon CEO Rex Tillerson was confirmed as U.S. Secretary of State. The Texan has a long history of working with Russia as Exxon’s CEO, and he was once awarded Russia’s “Order of Friendship.” As Secretary of State, Tillerson spent a few days in Moscow earlier this month to meet with Russian President Vladimir Putin. Despite their history together, the meeting did not go well—Tillerson said afterward that relations between the U.S. and Russia are at a “low point,” which sounds about right considering the boiling tensions over Syria and the ongoing congressional investigation into Russian meddling in the 2016 U.S. elections. News of Exxon’s request was met with criticism from both Democrats and Republicans, and in light of the current state of things between the U.S. and Russia, Mnuchin’s decision to reject Exxon’s request comes as no surprise.
Are they crazy? @WSJ: "Exxon Seeks U.S. Waiver to Resume #Russia Oil Venture" https://t.co/CHKS3sjOa8
— John McCain (@SenJohnMcCain) April 19, 2017
Exxon’s waiver request also raised a conflict of interest for Tillerson, a Wichita Falls native. This was exactly the sort of thing that folks were worried about when Tillerson was nominated as Secretary of State last year. In December, The New Yorker’s Steve Coll, who authored one of the definitive books on ExxonMobil (2012’s Private Empire: ExxonMobil and American Power), wrote that Tillerson’s success at Exxon was “attributable in part to the work he has done in Russia,” noting that as Secretary of State, Tillerson “would be in a position to benefit the corporation where he spent his career, by, for example, advocating for the easing of Russian sanctions.” Tillerson did his best to alleviate those concerns when they were repeatedly brought up at his confirmation hearing in January, saying then that he looked forward to working with the Senate “particularly on the construct of new sanctions” against Russia “to cause modifications in Russia’s positions.”
While Exxon’s waiver request was made to the Treasury Department’s Office of Foreign Assets Control, the State Department would reportedly have had a say in whether it was approved, according to the Journal. A State Department spokesperson told the Journal that Tillerson has recused himself from all decisions involving Exxon for two years.