BP Will ‘Exit’ Its $14 Billion Stake At Russian Oil Giant In A Stark Sign That Western Business Has Severed Ties For Ukraine Invasion.
BP will ‘exit’ its $14 billion stake at Russian Oil Giant in a stark sign that Western business has severed ties with Ukraine.
British oil giant BP announced Sunday that it was “exiting” its $14-billion stake in Russian oil giant Rosneft in protest at Moscow’s invasion. This is one of the most significant signs that the West is cutting ties with Russia over the Kremlin’s invasion.
“Russia’s aggression against Ukraine is an act aggressive that is having devastating consequences throughout the region. BP has been operating in Russia for more than 30 years and has worked with highly skilled Russian colleagues. This military action is a fundamental shift. This has led to the BP board concluding, after a thorough process that our involvement in Rosneft (a state-owned enterprise), simply cannot continue,” Helge Lund, BP chair, said in a Sunday statement.
This announcement marks the end to one of the largest Western investments in Russia. It was seen as so important politically that Tony Blair, then-British Prime Minster, and Vladimir Putin, Russian President, attended a ceremony to sign a key portion of the deal in 2003. Putin described the BP-Russia agreement as “a reflection on the positive trends in Russia’s investment climate”.
According to reports, BP was under pressure by the British government, and decided to end the Rosneft relationship. BP also announced that its former chief executives, Bernard Looney, and Bob Dudley, have resigned from Russia’s board of directors “with immediate effect.”
Another sign of the uncertainty of Russia’s invasion is the abrupt divorce. The energy industry has seen wild swings in its oil and gas prices since the attack started last week. Rosneft’s 19.75% stake by BP accounted for a third and more than half the British company’s oil and gas production, respectively. BP’s involvement in Rosneft was one of the largest Western investments in Russia.
This is the latest example of the financial sanctions Western countries are imposing on Russia in response to its attack. It includes blocking Moscow’s access to the West’s central-bank reserves and cutting off Russian banks’ access to the global financial networks.
To comply with U.S. sanctions, the world’s largest computer-chip companies have begun to stop selling vital electronic components to Russia. The European Union has banned Russian flights from its airspace and forced Aeroflot, a Russian airline, to cancel many of its flights.
Hours after BP announced, Norway’s state-controlled oil company stated that it was also quitting Russian investments. This included a group of joint ventures valued at $1.2 million.
Rosneft’s ties with the Kremlin had made BP’s investment politically tense for a long time. About 40% of the company is owned by Russia. The oil giant is headed by Igor Sechin who was a former deputy prime minister in Russia and an ally of Putin. After Russia’s invasion of Ukraine and annexe of Crimea, the United States sanctioned Rosneft in 2014 and Sechin in 2015.
It is not clear whether Equinor or BP will find buyers for their holdings, or just walk away. BP is essentially erasing Rosneft, and will not recognize a portion of Rosneft’s net income, production, or reserves.
The British business and energy secretary praised BP’s decision in a tweet on Sunday.
According to the Financial Times, Looney was summoned by Kwarteng to meet with him on Friday after Russia invaded.
A spokeswoman for BP confirmed the meeting but could not comment on the content.
BP invested billions of dollars in the enterprise over the years, starting with its 1997 stake in the company.
“It caused us to fundamentally rethink BP’s position with Rosneft. I believe that the board’s decisions are right and in the long-term interest of BP.