Marking an abrupt end to the three decades of operating in the energy-rich country, British Petroleum (BP) has abandoned its 19.75 per cent stake in the Russian oil giant Rosneft, surprising the investors. This costly end is the most significant move made by a Western company in reaction to Moscow's invasion of Ukraine, intended to isolate the Russian economy for Putin's blatant move.
BP is one of the first Western Oil majors to establish a presence in Russia after the collapse of the Soviet Union. Rosneft accounts for almost half of BP's oil and gas reserves and a third of its production. In a memo to its employees, BP's chief warned of 'financial consequences' from this move, a hit that may amount to as much as USD 25 billion.
"Like so many, 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. 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. Our immediate priority is caring for our great people in the region and we will do our utmost to support them. We are also looking at how bp can support the wider humanitarian effort," BP Chief Executive Bernard Looney said in a press release.
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U.K. Business Secretary Kwasi Kwarteng welcomed the move of British Petroleum. "Russia's unprovoked invasion of Ukraine must be a wake-up call for British Businesses with commercial interests in (President Vladimir)Putin's Russia", Kwarteng said on Twitter.
On the other hand, Rosneft blames BP's decision on 'unpredecented political pressure', reported Russian news agencies.
Looney also said he will resign with immediate effect from the Russian company's board. BP also plans to exit its other business in Russia, which includes three joint ventures with a joint value of about USD 1.4 billion. Looney and his predecessor as CEO Bob Dudley will both step down from the board of Rosneft.
It will take an USD 11 billion foreign exchange non-cash charge after the exit from Rosneft, which BP will no longer include in its accounts. BP said it also expects a second non-cash charge of up to USD 14 billion, for the "carrying value" of Rosneft.
BP received revenue from Rosneft in the form of dividends which totalled around USD 640 million in 2021, roughly 3% of its overall cash flow from operations. The company currently has around 200 employees in Russia, most of whom are local staff, the BP spokesperson said.