By Daniel Gilbert, James and Marson
Exxon Mobil Corp.'s chief executive is set to speak at an energy summit in Moscow on Monday, even though the U.S. government has discouraged American attendance as it tries to isolate the Kremlin over its actions in Ukraine.
CEO Rex Tillerson's scheduled address at the World Petroleum Congress, a major industry event held every three years, will be just months ahead of Exxon's plan to drill its first well in Russia's Arctic waters, with state-controlled OAO Rosneft.
He is appearing with the head of Rosneft, Igor Sechin, a longtime associate of Russian President Vladimir Putin. The U.S. Treasury sanctioned Mr. Sechin and others in April. The order bars U.S. citizens from doing business with him, but not Rosneft, and doesn't prohibit appearances with the Russian executive.
Exxon's alliance with Russia's largest oil producer represents one of the Irving, Texas, company's most promising chances to discover new petroleum reserves. But Exxon must chart a tricky course to stay in the good graces of both the Kremlin and the White House as tensions between the governments mount.
Ukrainian officials last week accused Moscow of moving tanks into the country to support pro-Russian separatists. U.S. and other countries backed up the claim, raising the possibility of further sanctions. Ukrainian President Petro Poroshenko said Saturday in a phone call with his French counterpart that the European Union should apply tougher sanctions if Moscow doesn't stop destabilizing Ukraine.
Russia has denied arming separatists.
The U.S. said it wasn't sending government officials to the World Petroleum Congress in Russia and discouraged senior U.S. executives from attending.
"We do not believe it is appropriate to return to 'business as usual' in Russia," Laura Lucas Magnuson, a spokeswoman for the U.S. National Security Council, said by email.
Exxon said only that Mr. Tillerson had attended the last four World Petroleum Congress conferences.
Rosneft confirmed that Mr. Sechin would appear with Mr. Tillersonon a panel , but declined further comment.
Exxon in 2011 beat out BP PLC and other competitors for the plum Arctic deal with Rosneft. The U.S. and Russian companies also plan to drill in shale formations in Siberia and to build a liquefied natural-gas plant in eastern Russia. Rosneft has acquired stakes in some of Exxon's oil-and-gas properties in the Gulf of Mexico.
Exxon hasn't veered from its plans to drill in the Russian Arctic's Kara Sea, beginning this August. The first target, the University Prospect, could hold the energy equivalent of billions of barrels of oil. The initial drilling alone is forecast to cost more than $3.2 billion, and it is likely to take years before the companies can coax meaningful amounts of crude from the Arctic.
Mr. Tillerson generally is opposed to sanctions, and Exxon has made its views known to the highest levels of U.S. government, he told reporters at the company's annual meeting recently. But last month he skipped the St. Petersburg International Economics Forum, a Russia-sponsored gathering where he was awarded the "order of friendship" by Mr. Putin last year.
The World Petroleum Congress, by contrast, is run by an independent organization and is held in a member country.
Mr. Tillerson's appearance at the summit "is an example of public diplomacy that's at cross-purposes with what the Obama administration would like to see," said Jim Krane, a fellow at Rice University's Baker Institute for Public Policy. But the company "can't pack its bags," he said, citing Exxon's considerable investment in Russia.
Exxon's engagement with the Kremlin could ultimately help accomplish U.S. goals of halting Russian aggression in Ukraine, some analysts said. Exxon is using its cash and engineering muscle to unearth new oil deposits, which would benefit the Russian government. More sanctions could prevent Exxon from investing in Russia and delay the Arctic drilling.
"I don't see that Rex Tillerson's actions are out of line with U.S. foreign policy," said Amy Myers Jaffe, executive director of energy and sustainability at the University of California, Davis. "Having important corporate leaders keep a dialogue open with the Russian leaders could be helpful."
Messrs. Tillerson and Sechin had high hopes when they announced their companies' pact. "It cannot be anything but helpful to broadening the relationship between the American people and the Russian people," Mr. Tillerson told analysts at New York's St. Regis Hotel in 2012.
Alexander Kolyandr in Moscow contributed to this article.
Write to Daniel Gilbert at email@example.com
Corrections & Amplifications
The surname of Rice University's Jim Krane was incorrectly spelled Crane in an earlier version of this article.
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