Exxon Mobil is pursuing a waiver from Treasury Department sanctions on Russia to drill in the Black Sea in a venture with Rosneft, the Russian state oil company, a former State Department official said on Wednesday. An oil industry official confirmed the account.
The waiver application was made under the Obama administration, the officials said, speaking on condition of anonymity, and the company has not dropped the proposal.
The proposal is now before the Trump administration at a delicate time in Russian-American relations, with rising tensions over the war in Syria and a looming congressional inquiry into reports of Russian efforts to influence the United States presidential election.
The appeal did not come up during Senate confirmation hearings for Secretary of State Rex W. Tillerson, who was Exxon Mobil’s chief executive before his nomination by President Trump and was known to have a strong working relationship with President Vladimir V. Putin of Russia. At the time, Mr. Tillerson and other company officials said they had not lobbied against the sanctions, which were imposed on Russia in response to its military intervention in Ukraine.
But Mr. Tillerson and company officials did note that Exxon Mobil had received a waiver to complete drilling of an exploration well in Russia’s Arctic waters. Company officials also disclosed that they had urged Obama administration officials to make American sanctions consistent with European Union sanctions, which gave greater latitude to European companies to continue taking part in some Russian projects.
The Exxon Mobil waiver request for the Black Sea was reported Wednesday by The Wall Street Journal.
Asked about the waiver application, Alan Jeffers, an Exxon Mobil spokesman, said, “We don’t comment on ongoing issues.” A Treasury representative said the department would not comment on individual licenses or waiver requests.
The oil industry official said that the application had been made in 2015, with Exxon Mobil arguing that it could lose its contractual exploration rights in the Black Sea if it did not begin drilling operations by the end of 2017. European companies, particularly Eni, the Italian oil and gas giant, could then pick up the work.
The Russian news media quoted Zeljko Runje, Rosneft’s vice president for offshore projects, saying last June: “We are going to drill with Eni next year. That is our plan. On the Black Sea.”
European sanctions exempted some contracts previously signed by European companies, while United States sanctions drew a harder line, international energy specialists said.
Hal Eren, a former official in the Treasury Department’s Office of Foreign Assets Control, said that such waivers were rarely requested or granted and that in most cases such permission was given only for environmental or safety reasons. The Exxon request is particularly unlikely to succeed, he said, because of the narrow nature of the current sanctions.
“I don’t think they would issue a license, especially given the political context in which this takes place,” Mr. Eren said.
United States and European sanctions were imposed on Russia in March 2014 in response to Moscow’s annexation of Crimea from Ukraine. Even as the Ukraine crisis deepened, Exxon continued pressing for deeper involvement in Russia’s oil industry.
The company’s exploration chief, Neil W. Duffin, signed an expansion of its joint venture projects in the spring, even after Rosneft’s chief executive, Igor I. Sechin, had been personally blacklisted under the sanctions. The deal violated no laws, but was made despite the clear risk of wider sanctions over the war in Ukraine.
Tighter sanctions on advanced oil drilling technology transfers and on Rosneft itself were enacted a few months later when Russia was implicated in the shooting down of Malaysia Airlines Flight 17 over eastern Ukraine that July.
Exxon Mobil has received a few exceptions to the sanctions.
It was allowed to complete drilling from one advanced rig in the Kara Sea, in the Arctic, in September and October 2014, after arguing it would not be safe for the environment or the equipment to leave the well unfinished. No oil was produced, but oil was found for future production.
What a coincident that Rex Tellirson’s announcement to conduct “comprehensive review” on Iran comes hand to hand with Exxon Mobil’s intention to resume its operations in Russia.
Is this an indication that some sort of agreement was reached behind closed doors?
If the agreement was made, it is possible that Iran might be left without Russia’s support.
Assuming that my theory is correct and if Iran is deprived of ability to export its oil production, it would be in line with economic interest of Russia, political and economic interest of Saudi Arabia and the United States, not to mention business interest of the rest of OPEC members as well as the entire oil and gas industry.