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Highlights
- British energy giant BP to exit from Russian Rosneft in response to Russian attacks on Ukraine.
- BP believes the Russian exit is in best long-term interest of all its shareholders.
- BP’s exit puts the spotlight on other Western companies having stake in Russia.
Global energy giant BP Plc (LON:BP) has sparked a new row of actions against the Russian invasion on Ukraine with its decision to exit from its shareholding in Rosneft. Russia’s western allies are already peaking sanctions including moves like closing airspace, cutting Russian banks off SWIFT network and other moves. BP’s decision to exit Russia marks a major corporate action in response to the growing pressure from Western governments to widen economic sanctions on Russia.
BP loses billions as it abandons Russian Rosneft
BP has announced its exit from Russian oil giant Rosneft ending abruptly an over three-decade old operation in the energy-rich country. Around half of BP’s oil and gas reserves and a third of its production comes from the Russian Rosneft. The divestment of BP’s 19.75% in Rosneft is to charge up to US$25 billion to the British company. However, the company has decided to exit the Russian territory amid escalating tensions between Russia and the West.
In addition to quitting its stake in Rosneft, BP is also removing its top executives from the Rosneft board. BP CEO Bernard Looney and former group CEO Bob Dudley are resigning from the Rosneft board with immediate effect.
As per BP’s CEO, Bernard Looney,
The changes will need BP to amend its accounting treatment of its Rosneft and a material non-cash charge on its first quarter 2022 results are being anticipated by the company. BP will account for its interest in Rosneft, as a financial asset measured at fair value rather than taking it equity. Further, the change is expected to result in non-cash adjusting item charge, from accumulated foreign exchange losses, previously recorded in equity. It is to be around a US$11 billion worth of adjustment in BP’s books.
BP has also decided to exit its other businesses with Rosneft in Russia and will continue to comply with all international trade rules and sanctions. The dramatic exit of BP, reportedly Russia’s biggest foreign investor puts the spotlight on other West world corporations too.
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Corporates align to West world’s sanctions on Russia
Not just BP other global corporations like US’s Alphabet has already barred Russian channels from receiving ad money from their websites, apps and YouTube videos. It is in line to what Facebook did after the news of the Russian invasion on Ukraine came out. According to reports, European Union's internal market chief has also told Alphabet and its YouTube unit to ban any users pushing war propaganda.
Further US-based logistics companies FedEx and United Parcel Services are also reportedly halting delivery service to Russia and Ukraine. Technology company Dell has reportedly suspended sales in Ukraine and Russia in line to US restrictions on exports of tech equipment. Numerous Western banks and financial institutions are expected to declare Russia as a no-go zone after cutting down Russian banks off the trillion-dollar secure financial network SWIFT. Many European nations are also freezing Russian assets and the economic sanctions are anticipated to disrupt the Russian economy.
Bottom line
In the most recent from the Russian Ukraine tussle, Putin has in response to the Western reprisal, put Russia’s nuclear deterrents on high alert. However, BP abandoning stake in Russian Rosneft marks a significant move by a Western company against the Russian invasion, underscoring mounting pressure from Western governments to deter the Russian economy. The west seems to be continuously making efforts to push down Russian economy an incapacitate them for any major moves against Ukraine.
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