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2022-02-28 21:16

BP plc closed roughly 5.0% down after the British multinational sold its entire stake in Rosneft which is a Russian oil giant. It is the most substantial reaction yet from a Western company to Russia's attack in Ukraine.
Rosneft controls around half of BP's oil and gas reserves. However, a third of its output and the sale of the 19.75% ownership will result in penalties of up to $25 billion. BP Chief Executive Bernard Looney said:

"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."

Significance of BP’s announcement
The abrupt withdrawal signifies a stunning exit for BP, Russia's largest foreign investment. Furthermore, it draws attention to other Western firms with activities in the nation, such as Total Energies (TTEF.PA) of France and Shell (SHEL.L) of the United Kingdom, amid an intensifying conflict between the West and Moscow. It also highlights mounting pressure from Western countries on their corporations to reduce activities in Russia as financial sanctions against Moscow are tightened.

On twitter, British Business Secretary Kwasi Kwarteng, stated:

"Russia's unprovoked invasion of Ukraine must be a wakeup call for British businesses with commercial interests in (President Vladimir) Putin's Russia."

Rosneft’s comments on BP’s decision
Rosneft said BP's decision was the result of "unprecedented political pressure." According to Russian news outlets, 30 years of fruitful partnership had been wrecked. Earlier, Putin raised Russia's nuclear deterrent to high alert in response to Western retaliation for his invasion of Ukraine, which included barring certain Russian banks' access to the SWIFT international payment system.

BP stated that its decision and financial impact will have no effect on its short and long-term financial aims as part of its strategy to transition away from oil and gas and toward low-carbon fuels and renewable energy. Following its separation from Rosneft, BP will incur a non-cash foreign currency charge of $11 billion, which it will no longer disclose in its financial statements. BP reportedly estimates a second non-cash charge of up to $14 billion for Rosneft's "carrying value."

BP received dividends from Rosneft totalling over $640 million in 2021, accounting for around 3% of their entire cash flow from operations.

Thierry Bros, an energy expert and professor at Sciences Po Paris said:

“In Europe, we are at war and we need to consider those companies as an extension of the Russian state. The system will use whatever it has.”