Amid Russia-Ukraine war, BP, the energy behemoth, announced on Sunday that it was offloading its 19.75 per cent stake in Rosneft, a Russian-controlled oil company. Bernard Looney, the chief executive officer, BP and Bob Dudley, former executive, also resigned from from Rosneft’s board, effective immediately.
Russian President Vladmir Putin had announced a military operation in Ukraine last week. Russian invasion of Ukraine has forced the energy giant to reconsider its holding in a Russian oil company. It must be noted that BP has worked in Russia for more than three decades.
“This military action represents a fundamental change. It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue,” said BP chair Helge Lund said in a statement.
$25 Billion Financial Hit
The oil major did not clarify whether it was planning to sell its stake in Rosneft or walk away. Amid continuous sanctions from the Western countries, it would difficult a bet for any potential buyer. This surprise move will result in charges of up to $25 billion at the end of the first quarter, BP said in a statement, according to Reuters.
“If BP walks away with nothing, that’s $25 billion non-cash loss,” said Javier Blas, energy and commodities columnist at Bloomberg.
“Like so many, I have been deeply shocked and saddened by the the situation unfolding in Ukraine and my heart goes out to everyone affected,” Looney said.
BP will also exit its other business in Russia, including three joint ventures with a carrying value on its books of about $1.4 billion, according to Bloomberg.
Will Other Western Companies Follow this Suit?
There have been reports that BP has been facing tremendous pressure from the United Kingdom government to exit its stake in the Russian oil company. British officials were accusing Rosneft of fueling the Kremlin’s advance into Ukraine, the Wall Street Journal said in a report. The company also acknowledged that any sanction on Russia could be problematic for its business.
BP was one of the first Western oil majors to establish a presence in Russia after the collapse of the Soviet Union. This sudden move by BP could put a pressure on other oil giants to exit Russia. Norwegian oil company Equinor also announced to exit its stake in Russian JVs, valued at over $1 billion.
British government business secretary Kwasi Kwarteng welcomed the BP’s decision. “Russia’s unprovoked invasion of Ukraine must be a wake up call for British businesses with commercial interests in Putin’s Russia,” he further added.
Labour MP Ed Miliband has asked more energy players to cut business relations with Russia. He said, “Shell should now follow BP and divest their Russian holdings to isolate the Putin regime,” he added.
Now, it will be interesting to see if the other Western investors will follow suit after BP’s bold move.
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