As Russia’s attacks on Ukraine continue, British energy giant BP announced Sunday it was offloading its 19.75% stake in Rosneft, a Russian-controlled oil company.
BP is abandoning its stake in Russian oil giant Rosneft in an abrupt and costly end to three decades of operating in the energy-rich country, marking the most significant move yet by a Western company in response to Moscow’s invasion of Ukraine.Rosneft accounts for around half of BP’s oil and gas reserves and a third of its production and divesting the 19.75% stake will result in charges of up to $25 billion, the British company said, without saying how it plans to extricate itself.”I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected. It has caused us to fundamentally rethink bp’s position with Rosneft,” BP Chief Executive Bernard Looney said.
The chairman of BP indicated that holding the Russian assets was not in line with the company’s “business and strategy.”
BP chair Helge Lund said that the company had operated in Russia for over 30 years and worked with “brilliant” colleagues there.
“However, this military action represents a fundamental change,” Lund said in a statement. “It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue.”Lund said the Rosneft holding was no longer in line with BP’s business and strategy.
The $25 billion of possible loss includes the impact of selling the Rosneft stake, valued at $14 billion, plus a significant expected charge related to foreign-exchange losses. But there is more: BP relies on Rosneft for roughly one-third of its oil-and-gas production.
BP Chief Executive Bernard Looney and former CEO Bob Dudley will resign from Rosneft’s board, the British company said.It is unclear how BP will exit the Rosneft stake during a tumultuous time for Russian companies, which face a growing array of sanctions and limits on their ability to access the global financial system. All of that could affect BP’s ability to recover the holding’s full value.BP’s decision reflected a rapidly escalating pullback by Western businesses facing moral and political pressure to sever Russian relationships following the country’s military campaign against Ukraine.
Additionally, British officials put a lot of pressure on BP and accused Rosneft of fueling the Kremlin’s advance into Ukraine.
UK’s business secretary Kwasi Kwarteng, who reportedly held a talk last week with BP, said on Twitter he welcomed the company’s decision.“Russia’s unprovoked invasion of Ukraine must be a wake up call for British businesses with commercial interests in Putin’s Russia,” Kwarteng said.
But BP is not the only oil company making this decision. The Board of Directors of Norway’s Equinor has decided to stop new investments into Russia and start exiting joint ventures. The firm has been in Russia for 30 years.
“We are all deeply troubled by the invasion of Ukraine, which represents a terrible setback for the world, and we are thinking of all those who are suffering because of the military action,” says Anders Opedal, President and CEO of Equinor.Early this week Equinor will present a commitment to contribute funding to the humanitarian effort in the region.“In the current situation, we regard our position as untenable. We will now stop new investments into our Russian business, and we will start the process of exiting our joint ventures in a manner that is consistent with our values. Our top priority in this difficult situation is the safety and security of our people,” says Opedal.
I suspect the moves by BP and Equinor will hurt Russia far more than signing orders to stop vodka sales.
CLICK HERE FOR FULL VERSION OF THIS STORY