Exxon to end Sanction-struck Russian JVs

US oil and petrochemicals multinational Exxon Mobil has decided to end its exploration joint ventures with Russia’s Rosneft due to US and international sanctions that have blocked the drills.

In its annual 10-k filing to the US Securities and Exchange Commission (SEC) last week, the group said it plans to withdraw from the projects sometime this year, taking a $200 million after-tax write-off. State-run Rosneft said it would continue with the projects alone but leave the door open to Exxon for the future.

The 2011 deal with Rosneft to drill on- and offshore from Russia’s Arctic to the Black Sea pre-dates the sanctions. Brokered by then-CEO Rex Tillerson, who is now US Secretary of State, it called for the two groups to eventually invest as much as $500 billion. Exxon reportedly saw this as a stepping-stone toward tapping shale gas reserves in Russia's Arctic, Black Sea and Siberian regions.

Exxon was force to half all work on the project in 2014, when the US and the EU imposed sanctions punishing Russia for annexing the Crimean peninsula and backing Ukrainian separatists. The restrictions were toughened after the country was accused of meddling in the 2016 US election.

Efforts by Exxon to have the sanctions lifted were to no avail. Instead, it was fined $2 million by the US Treasury Department last year when it signed contracts with Rosneft chief Igor Sechin, who was blacklisted by the US. The Houston group filed suit against Treasury in hope of getting the penalty – which it called “fundamentally unfair.”

The oil group’s long-standing venture with Rosneft as well as Indian and Japanese companies on Sakhalin Island in Russia’s east is unaffected by the withdrawal from the other project.

In 2012, the Russian government honored Tillerson with the country’s Order of Friendship decoration for his services to the country.