ExxonMobil to Challenge Retroactive Changes to Guidance on Russian Sanctions

IRVING, Texas–(BUSINESS WIRE)–ExxonMobil
said today it has launched a legal challenge to a finding by the
Treasury Department’s Office of Foreign Assets Control (OFAC) that it
violated U.S. sanctions against Russia in 2014 when the company followed
authoritative and specific guidance from the Obama administration that
OFAC retroactively changed a year later.

“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,” said ExxonMobil’s filing
in the U.S. District Court.

OFAC’s action 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 interpretation OFAC now seeks to retroactively enforce,
the filing said.

At the center of the dispute are interactions ExxonMobil had with the
Russian oil company, Rosneft and with Igor Sechin in his capacity as CEO
of Rosneft.

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.

A March 17, 2014, White
House Fact Sheet said: “Our current focus is to identify these …
individuals and target their personal assets, but not companies that
they may manage on behalf of the Russian state.”

The position was confirmed on May 16, 2014 by a Treasury Department
spokesperson, who said by way of example that BP’s American CEO was
permitted to participate in Rosneft board meetings with Sechin so long
as the activity related to Rosneft’s business and not Sechin’s personal
business.

However, two months later, in July 2014, despite the White House and
Treasury guidance that had already been given, OFAC contacted ExxonMobil
to say it was still formulating its own policy. Nearly a year later, in
June 2015, OFAC notified ExxonMobil through a pre-penalty notice that it
had violated guidance that had not been developed when the alleged
offences took place. The penalty notice was issued on July 20.

When Sechin was added to the sanctions list in April 2014, the White
House and Treasury Department in numerous briefings and media reports
specifically stated the sanctions applied to him in his individual
capacity and with respect to his personal assets, and not the business
he manages.

ExxonMobil followed the clear guidance from the White House and Treasury
Department when its representatives signed documents involving ongoing
oil and gas activities in Russia with Rosneft – a non-blocked entity —
that were countersigned on behalf of Rosneft by Sechin in his official
capacity. At the time of the signing, those activities themselves were
not under any direct sanction by the U.S. government.

ExxonMobil said a 2012 Supreme Court ruling involving drug company
SmithKline Beecham is relevant to this matter.

In the case, the court said the following: “It is one thing to expect
regulated parties to conform their conduct to an agency’s
interpretations once the agency announces them; it is quite another to
require regulated parties to divine the agency’s interpretations in
advance or else be held liable when the agency announces its
interpretations for the first time in an enforcement proceeding and
demands deference.”

Chronology of Events Leading to Allegations of Sanction Violations

• March 16, 2014. President Obama issues Executive
  Order 13661 Blocking Property of Additional Persons Contributing
  to the Situation in Ukraine.
• March 17, 2014. White
  House Fact Sheet: “Our current focus is to identify … individuals
  and target their personal assets, but not companies that they may
  manage on behalf of the Russian state.”
• March 17, 2014. White
  House Briefing: “[O]ur current focus is to identify these cronies
  of the Russian government and target their personal assets and wealth,
  rather than the business entities and industries that they may manage
  or oversee.”
• April 28, 2014. Treasury
  Department Briefing: Sanctions were applicable to Igor Sechin
  “individually.”
• April 28, 2014. Tony Blinken, White House Deputy National Security
  Adviser, said on PBS
  NewsHour that Sechin was sanctioned in his “individual capacity”
  and that Rosneft was not designated, “minimizing any impact or
  consequences on American companies.”
• April 28, 2014. New
  York Times: “U.S. persons are not prohibited from dealing with
  Rosneft, including participating in meetings of the company board on
  which Mr. Sechin sits,” a Treasury Department official said.
• April 28, 2014. Foreign
  Policy magazine: “Sechin’s personal assets will be frozen, but
  Treasury officials said the designation wouldn’t impact U.S.
  companies’ ability to do business with Rosneft because Sechin does not
  control the firm.”
• May 14, 2014. The president of ExxonMobil Development Company signs a
  document relating to a potential liquefied natural gas (“LNG”) plant
  in Far East Russia.
• May 15, 2014. ExxonMobil-Rosneft High Arctic Completion Deeds signed
  by president of ExxonMobil Exploration Company and Sechin, in his
  official capacity as president of Rosneft.
• May 16, 2014. Wall
  Street Journal: BP’s CEO, an American, “may participate in board
  meetings with Mr. Sechin as long as they are conducting Rosneft’s, and
  not Mr. Sechin’s, personal business, the Treasury Department said.”
• May 23, 2014. Sechin, acting in his official capacity as Rosneft’s
  president, countersigns the document relating to a potential LNG plant
  in Far East Russia.
• July 22, 2014. OFAC issues an administrative subpoena to ExxonMobil
  Development Company.
• July 30, 2014. OFAC acknowledges it has not yet come to a legal
  conclusion on whether Sechin’s signature violated sanctions.
• June 29, 2015. OFAC issues pre-penalty notice to ExxonMobil.
• Sept. 26, 2016. OFAC dismisses the importance of the White House
  guidance at a meeting with ExxonMobil.
• July 20, 2017. OFAC issues penalty notice to ExxonMobil.

Contacts

ExxonMobil
Media Relations, 972-444-1107