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Exxon Sues U.S. Treasury Over Fine Imposed For Violating Russia Sanctions

Exxon is suing the U.S. Treasury Department to challenge the Treasury’s US$2-million fine imposed for breaching Ukraine-related sanctions on Russia.

According to the Treasury Department’s findings that Exxon, in 2014 when Secretary of State Rex Tillerson was at its helm, signed documents with Rosneft and its CEO Igor Sechin, who is on the list of Specially Designated Nationals under the sanctions. Exxon is now disputing that ruling.

The Treasury’s Office of Foreign Assets Control (OFAC) “determined that ExxonMobil did not voluntarily self-disclose the violations to OFAC, and that the violations constitute an egregious case,” the Treasury said on Thursday as it slapped the fine on Exxon.

The dispute between the Treasury and Exxon stems from the interpretation of the term Specially Designated Nationals, referring to Sechin.

The Treasury said yesterday that OFAC considered as aggravating factors, among others, that “ExxonMobil demonstrated reckless disregard for U.S. sanctions requirements when it failed to consider warning signs associated with dealing in the blocked services of an SDN” and that “ExxonMobil’s senior-most executives knew of Sechin’s status as an SDN when they dealt in the blocked services of Sechin”.

Exxon, on the other hand, says that “OFAC alleges that ExxonMobil violated sanctions when it signed certain documents in May 2014 that were countersigned on behalf of Rosneft by Sechin acting in his official capacity as a Rosneft executive. OFAC has acknowledged that White House and Treasury Department officials repeatedly said sanctions involving Sechin applied only to his personal affairs and not to companies that he managed or represented.”

Related: What Bitcoin And Solar Have In Common

In its 21-page filing to a Texas district court, Exxon said:

“OFAC seeks to retroactively enforce a new interpretation of an executive order that is inconsistent with the explicit and unambiguous guidance from the White House and Treasury issued before the relevant conduct and still publicly available today. This is fundamentally unfair and constitutes a denial of due process under the Constitution, and violates the Administrative Procedure Act, because market participants, including ExxonMobil, did not have notice of the arbitrary and capricious interpretation OFAC now seeks to retroactively enforce.”

In its press release announcing the lawsuit, Exxon enlists the chronology of events, citing executive orders and White House briefings and factsheets related to the interpretation of ‘individual assets’ of Specially Designated Nationals.

“Sechin, acting in his official capacity as Rosneft’s president, countersigns the document relating to a potential LNG plant in Far East Russia,” Exxon said, referring to documents signed on May 23, 2014. On July 22, 2014, OFAC issued an administrative subpoena to ExxonMobil Development Company, the oil supermajor said.

By Tsvetana Paraskova for Oilprice.com

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