By Jay Solomon and Bradley Olson
WASHINGTON -- President Donald Trump, whose family and political
aides have faced scrutiny over their ties to Russia, rejected a bid
by Exxon Mobil Corp. to sidestep U.S. sanctions against Moscow and
resume an oil venture with a politically powerful Russian energy
firm.
The announcement Friday comes as the White House pushes to firm
up the president's foreign-policy and domestic agenda as he nears
his 100th day in office next week.
Mr. Trump's decision to block Exxon Mobil, until the end of last
year headed by Secretary of State Rex Tillerson, also shows how
efforts to build bridges with Russian President Vladimir Putin are
proving difficult, senior U.S. officials said.
Congressional and Federal Bureau of Investigation probes into
ties between Mr. Trump's aides and Russian officials continue to
dominate Washington's political debate, these officials said. And
Mr. Putin repeatedly has made any strengthening of ties harder by
maintaining Moscow's support for Syrian President Bashar al-Assad
and escalating a crackdown on the Kremlin's political opponents at
home, the officials said.
The Wall Street Journal reported on Wednesday that Exxon last
month renewed a push for approval of a waiver on Russian sanctions
for its oil exploration venture with PAO Rosneft, the Russian
energy conglomerate closely aligned with Mr. Putin, according to a
person familiar with the discussion. The company had originally
submitted the application in 2015.
The venture was frozen in 2014 after the Obama administration
placed sanctions on Rosneft and its chief executive, Igor Sechin,
in retaliation for Russia's annexation of the Crimea region of
Ukraine.
"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," Treasury Secretary Steven Mnuchin said in a statement
Friday. U.S. officials said Mr. Trump made the decision after close
consultations with Mr. Mnuchin, a former Goldman Sachs
executive.
The Trump administration's decision likely will make it
impossible for Exxon to drill in Russia's Black Sea waters before
its agreement with Rosneft expires at the end of this year. Under
the companies' agreement, Exxon has until 2023 to explore some of
Russia's Arctic waters if sanctions are lifted, the company has
said.
"We understand the statement today by Secretary Mnuchin in
consultation with President Trump," said Alan Jeffers, an Exxon
Mobil spokesman. "Our 2015 application for a license under the
provisions outlined in the U.S. sanctions was made to enable our
company to meet its contractual obligations under a joint venture
agreement in Russia, where competitor companies are authorized to
undertake such work under European sanctions."
News of Exxon's Treasury application drew sharp criticism in
Congress over the past two days. Leading Democrats and some
Republicans have said the Trump White House should be increasing
sanctions on Russia for its alleged effort to interfere in last
year's U.S. election, rather than loosening them. Russia has denied
any interference in the election.
Lawmakers also raised concerns the Trump administration could
face a conflict of interest in ruling on the Exxon application,
given Mr. Tillerson's previous position as CEO, a job he held for
11 years. State Department officials said this past week that Mr.
Tillerson has recused himself from any issues related to Exxon for
two years.
"Given Russia's well-documented and troubling activities around
the world, it is troubling Exxon Mobil would continue to press for
its narrow economic advantage at the expense of our national
interests," Sen. Ben Cardin of Maryland, the ranking Democrat on
the Senate Foreign Relations Committee, said on Friday. "The deals
they are seeking would put money in the pockets of Russian
oligarchs and the Russian treasury, guaranteed to be used against
America, our interests, and our allies."
Lawmakers have said they are investigating a string of contacts
between Mr. Trump's aides and Russian officials during the campaign
and the presidential transition. These include meetings and phone
calls between his former national security adviser, Mike Flynn, and
Russia's ambassador to Washington, in which U.S. sanctions on
Russia were discussed. They also include meetings that Mr. Trump's
son-in-law, Jared Kushner, held with the head of a state-run
Russian bank that is on a U.S. sanctions list.
The administration has been in an awkward dance with the Kremlin
since Mr. Trump assumed office, after his repeated calls during the
campaign for warmer ties.
Earlier this month, the Pentagon launched airstrikes on a Syrian
military base believed to have been involved in a chemical-weapons
attack against Syrian civilians. The U.S. missiles risked hitting
Russian troops that were stationed at the base, according to U.S.
officials. Russia and Syria are allies.
Mr. Trump also authorized Montenegro this month to become the
29th member of the North Atlantic Treaty Organization, despite
repeated protests by Russia.
Mr. Tillerson visited Moscow last week to try to forge a more
united front and met with Mr. Putin for more than two hours. But
the former Exxon Mobil chief left Russia saying Washington's
relations with Moscow were at a "low point."
"The problem with sanctions is that they're right there at the
center of what went most wrong in Russian-American relations, and
that is, of course, the Ukraine crisis," said Stephen Sestanovich,
a Columbia University professor and the State Department's
ambassador-at-large to the former Soviet Union during the Clinton
administration. "There's a low level of trust."
Exxon Mobil's failure to win approval for its Black Sea venture
marks a blow for the Texas company's hopes for expansion and could
aid its rivals. In 2012, Mr. Putin had said the Exxon partnership
could eventually spend up to $500 billion together.
Although some of the European Union's sanctions were crafted in
a similar fashion as those in the U.S., they allowed many existing
agreements and plans to proceed. Because they allowed companies
with contracts under execution at the time of sanctions in 2014 to
continue with operations, Italian oil company Eni SpA is now
actively exploring Russia's Black Sea and Barents Sea waters,
according to the company.
Last year, Norway's Statoil ASA drilled two wells in the Sea of
Okhotsk at depths only slightly shallower than the 150-meter limit
outlined by the EU. French energy company Total SA in late 2013
launched a giant natural-gas export project in Russia's Yamal
Peninsula above the Arctic circle. The country now accounts for
about a fifth of Total's reserves, according to Tudor Pickering
Holt & Co.
Exxon also has projects that were allowed to proceed in Russia,
including further developments of its operations on Sakhalin Island
in the country's Far East. Because sanctions focused on the
transfer of energy technology in the Arctic, deep water or onshore
drilling techniques, the Sakhalin operations were exempt.
The company has said it is exposed to as much as $1 billion in
losses from its investments that have been put on hold by
sanctions.
--Felicia Schwartz contributed to this article.
Write to Jay Solomon at jay.solomon@wsj.com and Bradley Olson at
Bradley.Olson@wsj.com
(END) Dow Jones Newswires
April 21, 2017 21:15 ET (01:15 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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