Okay, the republican President Donald Trump’s White House is finally laying down its poker hand. It has been my theory/ speculation that one of the president’s major goals has been to figure out a way to lift the US sanctions against Russia established in 2014 as a response to Russia’s unprovoked incursion into Crimea, Ukraine.
Update on 4/21/17: The US Department of the Treasury has denied Exxon’s request for a waiver to allow it to do oil exploration in Russia’s arctic area as per its 2012 contract with Rosneft.
Here is the why…
Around 2012, there was this Exxon CEO Rex Tillerson who had been hard at work, negotiating and closing on a deal with Russia’s oil company Rosneft for oil exploration and drilling in the arctic area, valued by experts at upwards of $500 billion dollars. This deal granted Exxon access to explore in Russia’s Arctic area, the right to drill in Siberia and the chance to explore in the deep waters of Russia’s Black Sea. As luck would have it, the very first well that was constructed in the Artic was a bonanza beyond what anyone had imagined. But this steak of good fortune ended because of the 2014 sanctions enacted against Russia.
In the background, there is this former MI6 agent Christopher Steele who had been compiling notes from various Russian sources. Initially he had been hired by republican operatives to collect op-positional research against Donald Trump but then he was employed by democratic officials. Eventually, Mr. Steele developed concerns about the information that he was uncovering to where he shared his findings with the FBI. Some of the data has been confirmed by the US intelligence community.
Within Mr Steele’s dossier, there is a reference to Rosneft which is as follows:
“In terms of the substance of their discussion, Sechin’s associate said that the Rosneft President was so keen to lift personal and corporate western sanctions imposed on the company, that he offered (Carter) Page/Trump associates the brokerage of up to a 19 per cent (privatised) stake in Rosneft in return. Page had expressed interest and confirmed that were Trump elected US president, then sanctions on Russia would be lifted.”
If the above assertion is true, it would provide ample motivation for the president and his team to push for improved relations between the U.S. and Russia so that sanctions could be lifted.
Because of current events, it has became obvious that the lifting of sanctions against Russia in the near future is not likely. And then there is the ongoing FBI investigation into any links between the president’s team and Russia where those in the White House cannot predict when the house of cards will fall down on them.
And this is probably why Exxon has decided to openly request a waiver so that it can continue to complete the 2012 deal with Rosneft despite the 2014 US sanctions against Russia.
Here is the rest of the story…
On 4/19/17, Joy Solomon and Bradley Olsen of the Wall Street Journal penned the following report, “Exxon Seeks U.S. Waiver to Resume Russia Oil Venture: Exxon Mobil applied to Treasury for exemption to resume venture with Rosneft forged in 2012 by Rex Tillerson.”
“Exxon Mobil ” has applied to the Treasury Department for a waiver from U.S. sanctions on Russia in a bid to resume its joint venture with state oil giant PAO Rosneft, according to people familiar with the matter.”
“Exxon has been seeking U.S. permission to drill with Rosneft in several areas banned by sanctions and applied in recent months for a waiver to proceed in the Black Sea, according to these people. The company has sought approval for access to the region since at least late 2015, one person said.”
“The Black Sea request is likely to be closely scrutinized by members of Congress who are seeking to intensify sanctions on Russia in response to what the U.S. said was its use of cyber-attacks to interfere with elections last year. Congress has also launched an investigation into whether there were ties between aides to Donald Trump and Russia’s government during the presidential campaign and the political transition.”
“Secretary of State Rex Tillerson is Exxon’s former chief executive officer and in that role forged a close working relationship with Russian President Vladimir Putin and with Rosneft, a company that is critical to Russia’s oil-reliant economy.”
“The State Department is among the U.S. government agencies that have a say on Exxon’s waiver application, according to current and former U.S. officials.”
“Mr. Tillerson is recusing himself from any matters involving Exxon for two years, and won’t be involved with any decision made by any government agency involving Exxon during this period, a State Department spokesman said.”
“It isn’t clear whether the request with the Treasury Department’s Office of Foreign Assets Control was made before Mr. Tillerson joined the Trump administration. A spokesman for the Treasury Department said it doesn’t comment on waiver applications. An Exxon spokesman said the company wouldn’t discuss government deliberations on sanctions.”
“The sanctions affecting Rosneft involve the transfer of technology, banning U.S. companies from deals in the Arctic, Siberia and the Black Sea, areas that would require the sharing of cutting-edge drilling techniques. The sanctions, instituted after Russia annexed the Crimea region of Ukraine in 2014, also bar dealings with Rosneft’s chief executive, Igor Sechin, saying he “has shown utter loyalty to Vladimir Putin—a key component to his current standing.”
“Since the fall of the Soviet Union, Russia’s oil resources have been among the most sought-after prizes by U.S. and European oil companies, and multiple U.S. presidential administrations in both parties have worked to help them enter the country. As much as 100 billion barrels of oil is believed to remain untapped in the country, but many Western companies have been stymied in their attempts to reach those reserves, often by geopolitical risks.”
“Mr. Putin said Exxon and Rosneft might invest as much as $500 billion over the life of the partnership. In 2013, the Russian leader bestowed upon Mr. Tillerson the country’s Order of Friendship in part for his role in developing the joint venture.”
Exxon has reported it is exposed to losses from the Rosneft ventures of up to $1 billion before taxes, although the company has yet to recognize them on its books given its position that sanctions could be lifted.”
“Exxon received a U.S. waiver in September 2014, when the sanctions were first implemented and the company was working on a well in the Russian Arctic. Mr. Tillerson and other Exxon executives asked the Treasury Department and senior Obama administration officials to allow the company to complete the well, saying it wouldn’t be safe to leave before it was finished, according to people familiar with the matter. Treasury granted an extension, and the company completed drilling in 2016 and eventually withdrew its employees from the project.”
“Exxon has disclosed that in 2015 and 2016, the company received a license from the Treasury Department allowing the company to undertake “limited administrative actions” in its partnership with Rosneft, according to company documents. Such permission would put Exxon in a position to move quickly if it gets the green light to drill, according to the person familiar with the matter.”
“Exxon’s proposal to drill in the Black Sea has been circulated in various federal departments in recent months, several people said. Exxon is arguing that it deserves a waiver there because under its deal with Rosneft its exploration rights in the Black Sea will expire if it doesn’t act, and because some of its top foreign competitors aren’t similarly restricted.”
“It is unusual for a company to seek a waiver based purely on future business prospects, according to former U.S. officials. American companies often seek waivers from sanctions citing humanitarian, trade or operational issues, the officials said.”
“Exxon is worried it could get boxed out of the Black Sea by the Italians,” said a person briefed on the company’s waiver application.”
“The Black Sea may hold 30 billion barrels of oil, according to estimates from Russia, Turkey and Romania. Exxon has drilled there off the coast of Romania and holds a license for an area in Ukrainian waters.”
“Under the terms of its deal with Rosneft, Exxon needs an oil discovery in the Black Sea by the end of this year to obtain a Russian government license to drill. Unless Exxon receives approval soon, there might not be enough time to safely drill an exploratory well to be able to develop any discoveries, said oil industry experts.”
“Exxon has continued in recent years to drill and seek to expand its access around Sakhalin Island in Russia’s Far East, an area to which sanctions don’t apply.”
“Due to the sanctions, other major components of the Exxon-Rosneft agreement were put on hold in 2014, shortly before Rosneft revealed that the first well the two companies drilled together in the arctic waters of the Kara Sea may hold as much as 750 million barrels of oil.”