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BP to 'exit' its $14 billion stake in Russian oil giant in stark sign businesses in the West are breaking ties over Ukraine invasion

British oil giant BP said Sunday that it is ’exiting’ its $14 billion stake in Russian oil giant Rosneft over Moscow's invasion of Ukraine in one of the biggest signs yet that the Western business world is cutting ties over the Kremlin's invasion of Ukraine. Photo: File

British oil giant BP said Sunday that it is ’exiting’ its $14 billion stake in Russian oil giant Rosneft over Moscow's invasion of Ukraine in one of the biggest signs yet that the Western business world is cutting ties over the Kremlin's invasion of Ukraine. Photo: File

Published Feb 28, 2022

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British oil giant BP said Sunday that it is "exiting" its $14 billion (R215.4 billion) stake in Russian oil giant Rosneft over Moscow's invasion of Ukraine in one of the biggest signs yet that the Western business world is cutting ties over the Kremlin's invasion of Ukraine.

BP, which reportedly came under pressure from the British government to sever the Rosneft relationship, also said its current and former chief executives - Bernard Looney and Bob Dudley - have resigned from the Russian company's board "with immediate effect."

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The abrupt divorce is another sign of the uncertainty Russia's invasion has created in the energy industry, which experienced wild swings in oil and gas prices last week as the attack began. BP's 19.75 percent stake in Rosneft accounted for a third of the British company's oil and gas production and more than half of its reserves.

"Russia's attack on Ukraine is an act of aggression which is having tragic consequences across the region. BP has operated in Russia for over 30 years, working with brilliant Russian colleagues. However, 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," BP chair Helge Lund said in a statement Sunday.

The announcement marks the end of one of the Western world's largest investments in Russia, seen as so politically important that Russian President Vladimir Putin and then-British Prime Minister Tony Blair personally attended a signing ceremony for a key part of the deal in 2003. At that meeting, Putin called the BP-Russia deal "a reflection of the positive trends in Russia's investment climate."

It is the latest sign of the crushing financial punishment Western nations are meting out over Russia's attack, including blocking Moscow's access to the central-bank reserves it holds in the West and cutting Russian banks' access to global financial networks.

The world's biggest computer-chip companies have started halting sales to Russia of vital electronic components to comply with US-led sanctions. And the European Union is banning Russian flights from its airspace, forcing Russian airline Aeroflot to cancel many flights.

Hours after BP's announcement, Norway's state-controlled oil company said it, too, was quitting its investments in Russia - a group of joint ventures it valued at $1.2 billion.

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"We are all deeply troubled by the invasion of Ukraine, which represents a terrible setback for the world," Anders Opedal, president and chief executive of Equinor, said in a statement. "In the current situation, we regard our position as untenable," he added, saying that the company will begin "exiting our joint ventures in a manner that is consistent with our values."

BP's investment had long been politically tense, given Rosneft's ties to the Kremlin. The Russian government owns about 40% of the company. And the oil giant is chaired by Igor Sechin, the former deputy prime minister of Russia and a Putin ally. The United States sanctioned Rosneft and Sechin in 2014, after Russia's first invasion of Ukraine and annexation of Crimea.

It is unclear whether BP or Equinor will find buyers for their holdings or simply walk away from them. But BP is essentially erasing Rosneft from its books, saying it will no longer recognise a share of Rosneft's net income, production or reserves.

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Britain's business and energy secretary welcomed BP's move in a tweet Sunday.

"Russia's unprovoked invasion of Ukraine must be a wake up call for British businesses with commercial interests in Putin's Russia," Secretary Kwasi Kwarteng said.

On Friday, after Russia began its invasion, Kwarteng summoned BP CEO Looney to a meeting to express his concern about the Rosneft holding, the Financial Times and other media reported.

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A BP spokesperson confirmed the meeting, but she said she couldn't comment on what was discussed.

BP began building its stake in the company and its predecessors in 1997 and has invested many billions in the enterprise over the years.

The company's experiences in Russia were often tumultuous: Dudley was forced to flee the country in 2008 as tensions rose between BP and its joint-venture partners at the time. That joint venture was ultimately taken over by Rosneft, giving BP its Rosneft stake.

In a statement, Looney said he is "deeply shocked and saddened by the situation unfolding in Ukraine."

"It has caused us to fundamentally rethink BP's position with Rosneft. I am convinced that the decisions we have taken as a board are not only the right thing to do, but are also in the long-term interests of BP."

Dudley, an American who was in charge of BP's efforts to clean up after the 2010 Deepwater Horizon oil spill in the Gulf of Mexico and then became the company's chief executive, couldn't be reached immediately for comment. Rosneft also couldn't immediately be reached for comment.

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