ExxonMobil sues Russia over back taxes

US oil and gas giant ExxonMobil is suing Russia at the Swedish Arbitrage Court for back taxes it believes it overpaid on a joint project, the energy ministry said Thursday.

A spokeswoman for Russia’s energy ministry confirmed to AFP the launch of the legal proceedings, but would not give further details.

But Vedomosti business daily, which first reported the claim, quoted a source saying that ExxonMobil is seeking to recover part of $500 million in excess taxes it paid on its profits from the Sakhalin-1 project.

ExxonMobil was not immediately available for comment.

The energy giant has been paying 35 percent tax on its profits on the Sakhalin-1 project in Russia’s Far East. It owns 30 percent of the operation.

The 35 percent tax level was fixed when the project launched in the 1990s, but the state has since reduced taxes to 20 percent.

ExxonMobil chief executive Rex Tillerson visited Moscow last month for closed-door talks with Novak, reportedly to contest the taxes.

The energy giant is proposing that Russia repay half the amount of excess taxes and switch the company’s tax regime to 20 percent, Vedomosti reported.

Russia is preparing a compromise proposal and expects to settle out of court, the daily reported, citing its unnamed source.

ExxonMobil has nurtured close ties with Russian oil giant Rosneft in recent years, launching numerous joint projects in the Arctic and Far East.

Sakhalin-1 — a project to find and produce oil and gas off the island of the same name — is the largest recipient of foreign direct investment in Russia.

However Rosneft has been hit by Western sanctions over the Ukraine crisis resulting in several projects being frozen. In February, ExxonMobil said it had racked up a billion dollars in loss of potential earnings as a result.