Energy giants bp and Equinor have announced major moves to exit their investments and activities in Russia, following Russia’s invasion of Ukraine. Each company described their potentially costly decisions as values-motivated moves.
bp announced on Sunday that it will exit its nearly 20% stake in Russian oil major Rosneft, valued at $14 billion as of the end of 2021. In addition to the impairment to the carrying value of the Rosneft stake, bp will also realize a significant charge arising from accumulated foreign exchange losses, currently standing at around $11 billion.
bp also announced that its Chief Executive Officer Bernard Looney will immediately resign from the Rosneft board, as will former bp CEO Bob Dudley.
In a statement, Looney called the company’s decision “the right thing to do:”
“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 chair Helge Lund added:
“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.”
UK Business and Energy Secretary Kwasi Kwarteng praised bp’s announcement, adding, “Russia’s unprovoked invasion of Ukraine must be a wake up call for British businesses with commercial interests in Putin’s Russia.”
bp has also received strong support on its decision from investors. Andrew Millington, head of UK equities, abrdn, said:
“We are strongly supportive of the board’s decision and applaud them for taking swift action following the events of the last week. While there may be a significant financial cost to BP in exiting Rosneft it is unquestionably the right thing to do”.
Norway-based energy company Equinor also announced a decision to stop new investments into Russia and to begin the process of exiting its Russian joint ventures. Equinor’s non-current assets in Russia are valued at $1.2 billion (as of the end of 2021), and the company stated that its decision will lead to impairments.
Anders Opedal, President and CEO of Equinor, described the company’s decision as values-driven:
“In the current situation, we regard our position as untenable. We will now stop new investments into our Russian business, and we will start the process of exiting our joint ventures in a manner that is consistent with our values. Our top priority in this difficult situation is the safety and security of our people.”
Equinor said that it plans to announce a commitment to contribute funding to the humanitarian effort in the region this week.
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