Exxon Mobil refused request for waiver Russian Sanctions

On 21 April 2017, the U.S. Treasury, in consultation with President Trump, refused U.S. oil giant Exxon Mobil a waiver on Russian sanctions. This refusal puts a dent in Exxon Mobil’s plans to drill oil in the Black Sea. Currently, certain oil exploration activities are sanctioned by the U.S. (and the EU).

This refusal is a sensible one, given the sensitivities surrounding the ongoing investigations concerning alleged Russian meddling in the last U.S. Presidential election, not to mention the fact that current U.S. Secretary Rex Tillerson used to be Exxon Mobil’s chief executive.  

Treasury Secretary Steven Mnuchin on Friday at the International Monetary Fund headquarters in Washington. Credit Michael Reynolds/European Press photo Agency

According to the New York Times, U.S. Treasury Secretary, Steven Mnuchin, is stated as saying “In consultation with President Donald J. Trump […]  the Treasury Department will not be issuing waivers to U.S. companies, including Exxon, authorizing drilling prohibited by current Russian sanctions.”

Note that Exxon Mobil requested a waiver in the summer of 2015, which the Obama Administration did not act upon. In this context, Exxon Mobil motivated its waiver-request because it has a contractual obligation (a joint venture to drill in the Black Sea) with the blacklisted, i.e. designated, Russian company Rosneft (whose chief executive, Igor Sechin, a close confidante of President Vladimir Putin, is also personally blacklisted). 

Furthermore, Exxon Mobil justified its waiver request because it feels that as an U.S. company it faces more stringent restrictions than some of it’s European competitors – who are authorized to drill in Russian-related exploration projects. 

Exxon Mobile is most probably referring to it’s Italian competitor ENI (which has a joint venture in an exploration block next to Exxon Mobil’s in the Tuapsinskiy area of the Russian Black Sea). Another cited example in the media, is the Norwegian state oil company Statoil that is drilling off the Far East coast of Russia (a project authorized under European sanctions).

This is another example of the difference between U.S. and EU sanctions regimes. Although similar in approach, they are not identical. In this respect, the EU, exempted certain projects in relation with Russia, whilst the U.S. adopted a stricter line – prohibiting all types of projects – excluding waivers to wind-down activities.

President Trump during a news conference in the East Room of the White House this month. Credit Al Drago/The New York Times

It also signifies that President Trump’s electoral-pledge to improve relations with Russia has stalled. Given the rumblings that the Trump Administration has voiced against Russia, especially regarding its involvement in the ongoing Syrian conflict, Exxon Mobil’s rejected waiver-request shouldn’t come as a surprise. 

Finally, the EU’s approach towards Russia is demonstrated in the cited authorized oil projects. It’s no secret that EU member states are at odds regarding the scope and continuation of trade restrictions against Russia. These might even have been relaxed until the tragic downing of Malaysia Airlines Flight 17 over Eastern Ukraine, which killed a total of 283 passengers, including 80 children, and 15 crew members. 

What might also be a significant game changer is Brexit. Currently, the UK is one of the main driving forces behind EU sanctions against Russia and for that matter CFSP sanctions in general.

It will be interesting to see how the UK develops it’s sanctions policy in the post-Brexit era. I hope that the UK and EU will be wise enough to keep some form of partnership in the field of CFSP. At the same time, it will also be interesting to see how the EU (minus the UK) will develop its sanctions policies given that they will no longer have a major supporter for comprehensive economic sanctions within their ranks. Will it adopt only lukewarm sanctions due to lack of will or because the member states are divided – again eroding its standing on the global stage – which has already taken a beating over the last couple of years. 

Let’s see…..

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