circumvent the blocking measures by tapping into circuits of dark money flowing through secrecy-draped offshore shell corporations and sanction-busting banks. From the point of view of doing business with Western energy companies, the sanctions are boomeranging. They have created an investment vacuum, boosting energy companies based in the East, who are angling to replace Western firms in partnering with Rosneft. THE TILLERSON PARADOX In July 2017, ExxonMobil was fined $2 million by the United States Office of Foreign Assets Control (OFAC) for continuing to deal with Sechin in 2014 when Tillerson was still the CEO. ExxonMobil has sued the OFAC, claiming that, at the time, the sanctions pertained only to Sechin as a person, not as the president of Rosneft. The Russia sanctions are created and enforced by the U.S. State and Treasury Departments. With Tillerson’s ascendency, it was a solid bet that the chains on Rosneft would soon be unfastened. Consider that ExxonMobil’s bottom line was at risk of taking a billion- dollar hit due to sanctions and that ExxonMobil set up a $180 million tax shelter for Tillerson as he exited. During his Senate confirmation hearing, Tillerson incorrectly denied that ExxonMobil had lobbied against the Russia sanctions. In 2014, according to the New York Times , “[ExxonMobil] was making its skepticism about sanctions clear to the United States government. ‘Our views are being heard at the highest level,’ [Tillerson] said.”
has withered. Counterintuitively, increasing the reach of sanctions on Russian oligarchs and banks and Rosneft may have harmed U.S. energy interests more than Russia’s. For example, sanctions exploded a major Rosneft deal with ExxonMobil to mine the Arctic that was negotiated by Rex Tillerson a half decade before he resigned as ExxonMobil CEO to join Trump’s cabinet. Sanctions have also caused Rosneft to partner with non-U.S. firms and offshore entities to get around sanctions, although, clearly, Rosneft would have preferred to partner with American companies, as we shall see. The week before his inauguration, Trump said he was inclined to end the Russia sanctions. And so far, his administration has been lax on enforcing them, claiming that the restrictions are harming the fossil-fuel business that Trump has vowed to support. The administration has issued executive orders weakening regulations protecting the Arctic and other at-risk ecologies. It has repealed a regulation requiring energy and mining companies to disclose payments to foreign governments, a rule created to combat the unfair advantages of bribery. And Trump appointed a sanctions foe, Tillerson, as secretary of state. There is substantial congressional resistance to repealing the sanctions, however. And Congress can “trump” Trump’s agenda. The evolving Russia sanctions specifically target Putin-friendly oligarchs, state-run banks, Sechin, and Rosneft. Hungry for foreign capital in the wake of the sanctions, it appears that Rosneft is attempting to
76 March 2018
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