British Petroleum (bp), the largest foreign investor in Russia will exit its 19.75% shareholding in Russia’s Rosneft. bp has held a 19.75% shareholding in Rosneft since 2013.
PJSC Rosneft Oil Company (Rosneft) is a Russian integrated energy company controlled by the Russian government and headquartered in Moscow. The company specializes in the exploration, extraction, production, refining, transport, and sale of petroleum, natural gas, and petroleum products.
The Russian government holds a 40% direct stake in Rosneft, which is the largest oil refiner in the Russian Federation with 13 refineries. Its facilities processed 93mn tonnes of crude oil in 2020 and the company provides fuel to various parts of the Russian state, including the Russian Military.
Read also: Russia-Ukraine War: Multinational Companies operating in Nigeria with Exposure to Russia
On Sunday 27 February, bp finally bowed to pressure to sever its ties with Rosneft, in a Press release on its website, BP stated;
- bp will exit its 19.75% shareholding in Rosneft.
- Both bp-nominated directors to resign from Rosneft board with immediate effect.
- bp will no longer report reserves, production or profit for Rosneft.
- Changes in accounting treatment of Rosneft shareholding expected to lead to a material non-cash charge.
- bp’s financial frame and distribution guidance remains unchanged.
Additionally, bp chief executive officer Bernard Looney is resigning from the board of Rosneft with immediate effect. The other Rosneft director nominated by bp, former bp group chief executive Bob Dudley, is similarly resigning from the board.
Speaking about the exit, bp chair Heldge Lund said:
“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. We can no longer support bp representatives holding a role on the Rosneft board. The Rosneft holding is no longer aligned with bp’s business and strategy and it is now the board’s decision to exit bp’s shareholding in Rosneft. The bp board believes these decisions are in the best long-term interests of all our shareholders.”
bp chief executive officer Bernard Looney added:
“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.”
Bernard Looney has been a director of Rosneft as one of two bp-nominated directors since 2020. Bob Dudley has been a director of Rosneft since 2013.
The exit will not result is direct sell of bp stake in Rosneft, it will only transform the kind of ownership and reporting of same by the British oil giant.
bp explained in its press release that as a result of the resignations of bp’s nominated directors, it has determined that it no longer meets the criteria set out under International Financial Reporting Standards (IFRS) for having “significant influence” over Rosneft. bp will therefore no longer equity account for its interest in Rosneft, treating it now as a financial asset measured at fair value.
bp has been under tremendous pressure over its investment’s in Russia since the Russian Military began its operations in Ukraine.
Financial Times reported on Friday that the UK business secretary Kwasi Kwarteng summoned Bernard Looney, chief executive of BP, to a crisis meeting on the same day as the company faced calls from opposition MPs to divest its stake in Rosneft.
Opposition politicians in the UK, like the Labour MP Margaret Hodge and Sir Ed Davey, leader of the Liberal Democrats amongst others have called for bp to divest its Rosneft stake.
bp has been criticised before for its stake in Rosneft, which has been under US and EU sanctions since Crimea became part of Russia in 2014. The sanction measures however were designed to ensure Rosneft could still export oil and gas but hinder its future growth.
As a result, bp was still able to report profits of more than $2.4b from its Rosneft stake last year and collect $640mn in dividends, while Looney continued to sit on the Russian group’s board.
![Nnamdi Maduakor](https://investogist.com/wp-content/uploads/2021/01/Basil-150x150.jpg)
Nnamdi Maduakor is a Writer, Investor and Entrepreneur