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US, Russian Oil Partnership Continues Despite Sanctions

The logo of Russia's top crude producer Rosneft is seen on a price information board of a gasoline station in Moscow July 17, 2014.
The logo of Russia's top crude producer Rosneft is seen on a price information board of a gasoline station in Moscow July 17, 2014.
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The movement of an oil drilling rig into Russian waters in the Arctic is creating problems for the American company that controls it.

The move of the drilling equipment center had been planned for some time. But increasing tensions between the U.S. and Russia mean that it has attracted international observation.

ExxonMobil Corporation controls the rig. It is the U.S. oil company with the highest market value. Exxon is moving the rig from Norway to the Russian Arctic. It is hoping for a major discovery in the Kara Sea with its Russian partner, the Rosneft Oil Company.

The move has started just as the United States increased economic sanctions on Russia -- including on Rosneft. The restrictions ban U.S. companies from giving long-term financial support to many Russian companies. The U.S. acted because of increasing violence in Ukraine. The shooting down of a Malaysia Airlines passenger plane in eastern Ukraine means there probably will be more economic restrictions against Russia.

The movement of the oil rig by an American company into Russian waters does not necessarily violate the latest sanctions. But the joint effort could be considered support for Russia by a large American company. And this could hurt ExxonMobil.

Elizabeth Rosenberg is the energy program director for the Center for a New American Security. She is a former sanctions advisor at the U.S. Treasury Department.

The joint oil-drilling project is, in her words, “a bit discordant with the message that the United States government is trying to send.”

The project may show whether major oil companies will continue dealing with Russia even though the country’s conflict with the West has been growing.

In a statement, Exxon said “We are evaluating the impact of the sanctions and don’t have anything further at this time.”

The project means a difficult balance for Russia. The government wants to increase the amount of oil it produces and the money that oil brings. But it cannot ask so much from the companies that they violate the sanctions.

Observers say the latest U.S. sanctions are not necessarily designed to hurt projects between the Russian company Rosneft and its foreign partners. President Barack Obama said the sanctions were “designed to have maximum impact on Russia,” while limiting the effect on American companies or those of American allies.

But Mr. Obama also warned that additional sanctions may be placed on Russia if it does not change its actions in eastern Ukraine. That may be a sign that joint operations between U.S. and Russian companies could be banned.

Exxon has made decisions before that do not fully support U.S. government policies. For example, it decided to invest in Iraq’s Kurdistan area two years ago. It did so despite opposition from the central Iraqi government in Baghdad and from the U.S.

I’m Jonathan Evans.

This story is based on a Reuters news report.