U.S. Treasury Won’t Give Exxon a Waiver for Russian Drilling

Updated on
  • Paperwork was authorized earlier, but approvals stop there
  • Mnuchin made decision after consultation with president

Treasury Won't Issue Waiver to Exxon on Russia

Exxon Mobil Corp. won’t be allowed to bypass U.S. sanctions against Russia to resume drilling for oil in a joint venture that seeks to tap billions of barrels of that country’s crude.

Treasury Secretary Steven Mnuchin said the decision was made after consultation with President Donald Trump, according to a statement on Friday. Exxon initially requested the drilling waiver in 2015 and pushed for approval every few months since then, according to a person with knowledge of the matter who wasn’t authorized to speak publicly.

The waiver request drew criticism from a cross-section of leading U.S. policymakers, from Republican Senator John McCain, who wondered in a tweet whether Exxon was “crazy,” to Senator Bob Menendez, a New Jersey Democrat and sanctions hardliner who sits on the Senate Foreign Relations Committee.

“We understand the statement today by Secretary Mnuchin in consultation with President Trump,” Alan Jeffers, an Exxon spokesman, said in an emailed statement. The 2015 request “was made to enable our company to meet its contractual obligations under a joint venture agreement in Russia, where competitor companies are authorized to undertake such work under European sanctions.”

Investors shrugged off the Treasury Department’s decision; Exxon shares were little changed at $80.80 at 3:22 p.m. in New York on Friday.

Prior to Friday’s rejection, Exxon received three waivers to conduct unspecified paperwork for its venture with Moscow-based Rosneft PJSC, according to filings with the U.S. Securities and Exchange Commission. The waivers were approved twice in 2015 and again in October. The first came just months after the U.S. and European Union imposed wide-ranging sanctions that shut down a drilling project by the two companies in the Kara Sea, the documents showed.

The documents on file specify "limited administrative actions” but add no other detail.

Exxon has been eager to unlock the vast crude bonanza locked in Russia’s Arctic, Black Sea and Siberian shale since 2011, when then-CEO Rex Tillerson signed a watershed cooperation plan with Rosneft that was blessed by Russian President Vladimir Putin. At the time, Putin estimated the venture ultimately would invest as much as $500 billion over a span of decades.

Progress came to a standstill in 2014, when the U.S. and EU resorted to sanctions to punish Russia for annexing the Crimean peninsula and backing Ukrainian separatists.

Tillerson, who left Exxon in January to become U.S. Secretary of State, has vowed to recuse himself from any issues related to the company for two years.

Exxon executives have rankled at a loophole in the EU version of sanctions that grandfathered in existing projects. As a result, Italian oil major Eni SpA has been able to continue exploring the Russian sector of the Black Sea for oil after Exxon was forced to suspend plans to drill.