Stakes for Exxon in sanctions case go far beyond a $2-mn fine

The $2 million fine that the Treasury Department levied on Exxon Mobil this week for violating sanctions against Russia is just a sliver of the oil company’s $7.8 billion in profit last year. But Exxon has decided nonetheless to wage a legal battle — one that could make President Trump’s cabinet meetings decidedly awkward.

Rex W Tillerson, now the secretary of state, was Exxon’s chief executive at the time of the actions in dispute in 2014. And his former company is suing the Treasury and Steven Mnuchin, the Treasury secretary, in hopes of getting the penalty withdrawn and its reputation cleared.

The clash has created a new wrinkle in the intrigue that has captivated Trump’s Washington, and it has left some wondering why Exxon would fight over a paltry sum as a political furore over Russia swirls.

“It’s a fascinating dynamic playing itself out,” said Peter Kucik, a former official in Treasury Department’s Office of Foreign Assets Control. “It would be difficult to script this.”

The rationale for the lawsuit appears to go beyond the financial impact of the fine. Exxon feels that its reputation is at stake and that the threat of more sanctions, potentially costlier, is looming.

Treasury and Exxon have been sparring for years over the company’s ability to do business with Russia. The Trump administration has recently been trying to show its mettle with a flurry of sanctions announcements amid concerns that Trump may soften those already enacted. At the same time, a Republican-controlled Congress is threatening to increase Russia sanctions, which could cost the energy industry billions of dollars.

The core of the dispute is whether Exxon violated sanctions by signing eight contracts with Rosneft, the Russian state oil company, in May 2014. Signing on behalf of the Russian state oil company was Igor Sechin, its chief executive, who had been blacklisted by Treasury a month before.

Exxon argues that it had received guidance that it was not a problem if Sechin signed such contracts in his official capacity, as long as the company was not doing business with him as an individual. Exxon points to briefings by White House officials and news articles, including one from The New York Times that year, giving the impression that the company was in the clear.

“US persons are not prohibited from dealing with Rosneft, including participating in meetings of the company board,” a Treasury official told The Times in April 2014.

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