U.S. oil company Exxon Mobil says it will withdraw from its joint venture with Russia’s state-controlled Rosneft due to U.S. and European sanctions against the country.

Exxon Mobil had signed a deal with Rosneft, Russia’s biggest oil producer, in 2011 that aimed to drill in difficult terrain, like Russia’s Arctic waters. It combined Exxon’s high level of technology with Rosneft’s access to the area.

The deal came under strain, however, after the U.S. sanctioned Russia in 2014 over the invasion of Ukraine and the Crimean Peninsula. The sanctions did not affect existing deals in the energy sector, but prohibited any business with Rosneft CEO Igor Sechin, an influential oligarch in Russia.

That created a series of hurdles for the partnership. Exxon has applied for a waiver but without success. Last year, the U.S. Treasury fined Exxon $2 million for signing new deals with Sechin in 2014. Exxon sued the U.S. government to stop the fine.

The deal has come under extra scrutiny because Rex Tillerson, the current secretary of state, was the Exxon CEO who had struck the deal and has had reportedly good personal ties with Sechin.

As America’s top diplomat, Tillerson has insisted the sanctions will stay in place until Russia reverses course in Ukraine and gives back Crimea. Still, the Russian deal on his watch raises significant questions about his ability to credibly enforce the sanctions and to persuade European countries to keep doing so.

The situation was escalated further last year, when the U.S. expanded sanctions against Russia for allegedly interfering in the U.S. presidential election.

Exxon said in a note to its earnings report late Wednesday that it had made the decision to end the partnership in late 2017.

“The corporation expects it will formally initiate the withdrawal in 2018,” at a cost of about $200 million, it said.

Rosneft said in a statement that it “will continue the independent development of these projects,” and that it supports Exxon Mobil’s eventual return, should the law allow that.

 
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