David McNew/Getty Images(MOSCOW) — A major oil exploration project between ExxonMobil and a Russian government-owned oil company will be abandoned by Exxon after United States government sanctions prevented the venture from expanding and waivers for the project were denied.
News of the deal’s cancellation came in the form of a Securities and Exchange Commission filing by Exxon on Wednesday, which described its activities with Rosneft, the Russian company. Citing the codification and expansion of U.S. sanctions against Russia, Exxon noted in the filing that it decided to withdraw from the joint entity last year and will be initiating its exit during the course of 2018.
The deal was announced by Exxon in 2013, with then-CEO Rex Tillerson praising the effort to drill in the icy Kara Sea, to Russia’s north.
“ExxonMobil is making a significant investment in Russia, and these agreements serve as the foundation for our projects and future work together,” Tillerson said in a press release at the time. “Experience tells us that a good foundation is critical for success in the Arctic and elsewhere.”
Sanctions against Russia over its military’s actions in Ukraine in early 2014 were ordered in March of that year, and additional regulations were imposed last year in response to Russia’s interference in the 2016 U.S. presidential election. Exxon was denied a waiver for the non-election-related sanctions in April 2017 as it sought to move forward with the Rosneft deal.
In his current capacity as secretary of state, Tillerson expressed dismay at the additional sanctions approved by Congress during the summer of 2017, but said his opposition laid in his belief that they would harm efforts to improve relations with Russia. The secretary recused himself from all Exxon-related matters for the first two years of his tenure as secretary of state.
“We’ll just work with it, and that’s kind of my view is we’ll work with it. We got it,” Tillerson said of the new sanctions during a State Department briefing last August. “We can’t let it take us off track of trying to restore the relationship.”
Less than a month prior to the secretary’s comment, Exxon was fined $2 million for violating earlier related sanctions while Tillerson was CEO, a decision the company called “fundamentally unfair.” The Treasury Department cited the company for “demonstrated reckless disregard” for deals made with Rosneft Executive Chairman Igor Sechin, a close Vladimir Putin ally named in the sanctions.
In this week’s SEC filing, Exxon said its withdrawal from the project with Russia would result in a loss of $200 million after taxes.
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