US Will Not Permit Exxon to Drill in Russia

The United States will not make an exception for American companies, including oil major Exxon Mobil Corp, seeking to drill in areas prohibited by US sanctions on Russia, Treasury Secretary Steven Mnuchin said on Friday.

The unusually direct statement served to clarify that the United States would maintain a tough stance on sanctions against Moscow, Reuters reported.

"In consultation with President Donald Trump, the Treasury Department will not be issuing waivers to US companies, including Exxon, authorizing drilling prohibited by current Russian sanctions," Mnuchin said in a statement.

The United States and European Union imposed economic sanctions on Russia over its annexation of the Crimea region in 2014 and its role in the conflict in eastern Ukraine. The sanctions forced Exxon, the world's largest publicly traded oil producer, to wind down drilling in Russia's Arctic in 2014.

"We understand the statement today by Secretary Mnuchin in consultation with President Trump," Exxon spokesman Alan Jeffers said. Exxon had asked for and received in 2015 and 2016 waivers to operate a joint venture with Russian oil producer Rosneft in Russia. European Union sanctions do not keep European oil companies from operating in Russia, a point of annoyance for Exxon.

The Wall Street Journal reported this week that Exxon had in recent months applied for a Treasury Department waiver to drill with Rosneft. Jeffers said Exxon had not applied for waivers from Treasury since Trump took office.

Any such request would have drawn attention because Exxon's former chief executive, Rex Tillerson, is now US secretary of state. Under his leadership, Exxon lobbied Congress on Russia sanctions, and Tillerson opposed sanctions against Russia in 2014, saying they would be ineffective.

US companies frequently file license applications to the Treasury Department asking permission to undertake activities that would otherwise be barred by sanctions. The US government weighs each application based on national security interests, the law and other factors. The refusal is unlikely to affect Exxon Mobil's bottom line, as it has not been able to operate in Russia for several years, but it does hinder its growth potential.

Treasury almost never comments publicly on license applications. Mnuchin's statement will likely serve to clarify the US stance on sanctions against Russia at a time when American allies are looking for clues to US policy, observers said.