BP Quits Russia Incurring A Loss Of $25 Billion Following The Invasion Of Ukraine

BP is abandoning its investment in Russian oil producer Rosneft, representing the most substantial step yet by a Western business in response to Moscow’s invasion of Ukraine.

The 19.75 percent investment in Rosneft accounts for over half of BP’s oil and gas reserves and a third of its productivity, and removing it will result in charges of up to $25 billion, the British firm warned, without specifying how it intends to get out.

Bernard Looney, the CEO of BP, stated that the situation in Ukraine has astonished and saddened him, and his concerns go out to everyone who is impacted. It has caused BP to reconsider its relationship with Rosneft.

In the midst of an increasing crisis between the West and Moscow, the quick withdrawal symbolizes a significant exit for BP, Russia’s largest foreign investor, and puts the focus on other Western companies with operations in the country, including France’s Total Energies (TTEF.PA) and Britain’s Shell (SHEL.L).

It also highlights how Western countries are increasing pressure on their corporations to reduce activities in Russia as they tighten a net of economic sanctions against Moscow.

The decision was applauded by British Business Secretary Kwasi Kwarteng, who had expressed concern regarding BP’s Rosneft on Friday.

According to Russian news outlets, Rosneft (ROSN.MM) blamed BP’s decision on extraordinary political pressure, claiming that 30 years of effective partnership had been wrecked.

Putin had previously put Russia’s nuclear deterrent on high alert in response to Western retaliation for his invasion of Ukraine, which included certain Russian banks being denied access to the SWIFT international payment system.

After the invasion of Ukraine, Norway’s $1.3 trillion national wealth fund, the world’s largest, would liquidate its Russian assets, according to its prime minister. 

Blow of the dividend

BP stated that its decision and financial hit will have no effect on its immediate 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.

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However, a write-down of this nature, according to Streeter of Hargreaves Lansdown, is expected to restrict the amount to which BP can continue to speed its shift to renewables.

Both Looney and his replacement as CEO, Bob Dudley, will leave the board of Rosneft, which BP purchased a stake in as part of its $12.5 billion TNK-BP share sale in 2013.

According to a BP spokeswoman, the decision to leave Rosneft, as well as two other joint ventures BP has with Rosneft in Russia, was made at a board meeting on Friday and another on Sunday.

Following the separation from Rosneft, it will incur a non-cash foreign currency charge of $11 billion, which BP will no longer disclose in its financial statements. BP estimates a second non-cash charge of up to $14 billion for Rosneft’s carrying value, according to the company.

In 2021, BP received $640 million in dividends from Rosneft, accounting for around 3% of the company’s overall cash flow from operations.

According to a BP spokeswoman, the corporation presently employs roughly 200 people in Russia, the majority of whom are locals.

TotalEnergies, which owns 19.4 percent of Novatek (NVTK.MM) and 20 percent of the Yamal LNG project, is one of many Western energy companies with activities in Russia.

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