Exxon pulling out of joint oil projects with Rosneft due to anti-Russia sanctions

The setback in cooperation will not affect the Sakhalin project, which is not subjected to sanctions related to advanced technology transfer, the company’s spokesman said, as cited by Reuters. Exxon said it will begin withdrawing from the joint ventures with Russia this year, without providing any timeline.

In 2012, then Exxon CEO Rex Tillerson negotiated a deal with Rosneft to explore deposits in the Black Sea, the Arctic and Russia’s Far East. The deals, estimated to be worth some $500 billion in joint investments, were stalled by sanctions imposed on Russia following its reunification with Crimea in 2014 and the conflict in Ukraine, where the US and the EU claim Russia is backing rebel forces against Kiev.

Tillerson, ExxonMobil’s former CEO, resigned from the company after being appointed US Secretary of State by President Donald Trump. Tillerson’s nomination at the time drew criticism from both parties due to his supposedly close ties to Russian leadership.

The decision to pull out of the joint projects was made by Exxon in December, it said in an annual financial statement filed on Wednesday. Exxon estimates that ending the collaboration will cost them some $200 million in after-tax losses.

Commenting on Exxon’s withdrawal, Russia’s Trade Representative in the US, Aleksander Stadnik, called it an example of anti-Moscow sanctions backfiring to harm US businesses.

“They can talk as much as they like about the alleged billions in losses by the Russian defense industry as a result of US sanctions. However, the situation with Exxon Mobil indicates that the initiators of sanctions use dictatorial methods against American business, shooting it in the foot,” Stadnik told Sputnik

Last April, the Treasury Department refused to grant a waiver sought by Exxon to drill for oil and gas in the Black Sea in Russia. Exxon reportedly pointed out that some of its European competitors have already received sanction waivers and are drilling for oil in Russia despite the sanctions.

In July, Exxon, the world’s largest oil company, was fined $2 million by the US Treasury Department for signing eight more deals with the Russian oil giant, which the US government said were in violation of anti-Russia sanctions that were imposed in the wake of the Ukrainian conflict, which Washington and the EU blamed on Russia. All the deals were made in May 2014, when Tillerson was still the company’s CEO.

Exxon insisted the company had not violated any sanctions, as it followed the policy of former President Barack Obama’s administration when the deals were sealed and Rosneft was not subject to any sanctions at the time they were signed. The company argued that the Treasury Department retroactively changed the rules and they intended to contest the penalty in court.

While Rosneft’s CEO Igor Sechin was included on the list of sanctioned persons days before the deals were signed, Exxon argued that the Obama administration implied the sanctions would apply to him and his personal assets “individually.”

Large-scale cooperation between the two companies began in August 2011, when they signed a long-term Strategic Cooperation Agreement to jointly explore oil and gas fields in Russia and in the US. The companies also agreed to share technology. The agreement, signed in the presence of Russian President Vladimir Putin, included a $3.2 billion joint exploration project in the Black Sea and the Kara Sea. For its part, Rosneft was supposed to gain equity interest in Exxon assets in the offshore fields in the Gulf of Mexico, in Texas, and outside the US.

The companies also agreed to jointly study the possibility of developing oil resources in Western Siberia and work on new technology to be used in joint projects in the Arctic.

The amount of mutual investment within the partnership was estimated to be between $200 and $300 billion at the time, with Sechin saying the agreement could generate some $500 billion in total economic impact.