XOM Exxon Mobil Corp

By Samuel Rubenfeld, Lynn Cook and Ian Talley 

WASHINGTON -- The U.S. Treasury Department Tuesday imposed a $2 million fine on Exxon Mobil Corp. for what it called a "reckless disregard" of U.S. sanctions on Russia while Secretary of State Rex Tillerson was the oil giant's chief executive. The company immediately said it would challenge the finding.

Exxon, under Mr. Tillerson's helm, in early 2014 deepened the company's long-standing partnership with the Kremlin despite Washington levying fresh sanctions against Russia for seizing territory in eastern Ukraine. In May of that year, Treasury said the company signed eight documents relating to oil and gas projects in Russia that were also signed by Igor Sechin, chief executive of the state oil giant PAO Rosneft. Treasury said Thursday those deals were violations of U.S. sanctions against Mr. Sechin, a former Russian intelligence officer and top ally to President Vladimir Putin.

Mr. Tillerson, who has close ties to Russia and received an "Order of Friendship" award from Moscow, left Exxon last year to become U.S. Secretary of State. The $2 million fine, Treasury said, was the maximum amount it could levy against the company.

A spokesman for Exxon called the fine "outrageous" and said Treasury's findings are a 180-degree turn from previous guidance handed down by the Obama Administration at the time the sanctions were enacted.

Exxon doesn't have any direct deals with Igor Sechin, but does have business dealings with Rosneft, where Mr. Sechin in his capacity as CEO signed company documents, Exxon said. Under President Barack Obama, the White House and Treasury in 2014 said that U.S. companies were allowed to participate in business dealings with Mr. Sechin if they were professional, not personal, according to Exxon.

The Office of Foreign Assets Control "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," Exxon said in a filing filed in U.S. District Court in the Northern District of Texas.

When Mr. Tillerson took his position in President Trump's cabinet he promised to recuse himself from matters involving Exxon for one year. He hasn't spoken out expressly against the sanctions since taking office.

The company showed "reckless disregard for U.S. sanctions requirements" when failing to consider the warning signs associated with dealing in the blocked services of someone under U.S. sanctions, the U.S. Treasury said in an enforcement notice.

The State Department referred questions to Exxon.

Rosneft spokesman Michael Leontiev told The Wall Street Journal in an email, "I am sure that while Exxon was preparing the decision about documents signing it consulted with both OFAC and lawyers specialized on sanctions very carefully." Mr. Leontiev said that signing an agreement with Mr. Sechin not as an individual, but as a representative of Rosneft management, can't be the foundation for a sanctions violation.

The penalty, issued by Treasury's sanctions unit, the Office of Foreign Assets Control, comes as committees in the Senate and House of Representatives, as well as a Justice Department special prosecutor, investigate what U.S. intelligence agencies say was a Kremlin-backed campaign to interfere in the presidential election, and whether there was any collusion between the Trump campaign and Russia. President Donald Trump has denied any collusion. Russia has denied meddling.

"ExxonMobil caused significant harm to the Ukraine-related sanctions program objectives by engaging the services" of a sanctioned entity, Treasury said.

Exxon and other big energy companies recently joined President Trump in voicing concerns about Congressional efforts to toughen sanctions on Russia, arguing that it could shut down oil and gas projects around the world that involve Russian partners. Exxon unsuccessfully sought a sanctions waiver from the administration on at least one Russian deal.

Lobbyists for Exxon told lawmakers that several provisions in the sanctions legislation under consideration on Capitol Hill are worrisome, including measures to prohibit partnerships with Russian individuals. Companies have also voiced concern that the bill could force them to disclose information they consider proprietary.

Write to Lynn Cook at lynn.cook@wsj.com and Ian Talley at ian.talley@wsj.com

(END) Dow Jones Newswires

July 20, 2017 16:02 ET (20:02 GMT)

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