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RUTH SUNDERLAND: BP’s toxic Rosneft dilemma

RUTH SUNDERLAND: Millions of us have a financial interest in BP but severing ties with Rosneft means our savings are not fuelling Russian tanks

  • BP’s behaviour around the world affects Britain’s national standing
  • Severing of ties with Rosneft only the start of what will be a fraught process
  • BP hauled in £27billion of cash in two decades from its Russian enterprises 
  • In its eagerness to embrace Russian oil, BP put profits before moral scruples 










The lifting of the Iron Curtain and what at the time seemed the unequivocal victory of free market capitalism was for BP the start of a great adventure in Russia. 

It became one of the most profitable forays in its history – and also one of the most troublesome. 

The company’s holding in Kremlin-backed oil giant Rosneft is a legacy of an earlier joint venture, TNK, which it set up with four oligarchs. Although the Rosneft stake has been highly lucrative, it has become deeply toxic. BP’s announcement that it is to exit comes not a moment too soon. 

Signing off: Although it no longer uses the ‘British Petroleum’ name, BP is seen around the world as a flag-bearer for corporate Britain

The UK oil giant’s chief executive, Bernard Looney, and former BP boss Bob Dudley are resigning from the board of Rosneft, run by Putin ally Igor Sechin. Looney is also stepping down from the board of trustees of the Russian Geographical Society, where he has been serving alongside Putin himself. 

It was obvious last week when Russia invaded Ukraine that it was unacceptable to maintain ties with Rosneft, which is closely linked to the murderous regime. 

Although it no longer uses the ‘British Petroleum’ name, BP is seen around the world as a flag-bearer for corporate Britain: its behaviour affects our national standing. 

But disentangling from Rosneft – whose products have been enriching BP and fuelling the Russian military – is easier said than done, and comes at a heavy cost. 

The severing of ties is only the start of what will be a fraught process. One missing piece of information from the announcement is: who will be the buyer of such a pariah asset? Rosneft itself, maybe, possibly the Qataris, who also have a stake, or the Chinese, perhaps? And it’s possible Putin will simply seize the holding.

Around 50 per cent of oil and gas reserves and 30 per cent of production will come off BP’s books. There will be no more dividends flowing in from Rosneft, which have been running at around $640m (£479m) a year. 

BP claims it can still grow dividends at 4 per cent with share buybacks of $4billion a year until 2025. But the move will result in nasty writedowns: one of £8.25billion for foreign exchange losses and another to cover the potential loss on the Rosneft stake, which is in the accounts at £10.5billion but whose ‘fair value’ will be a lot less. 

The stream of dividends from Rosneft – £3.75billion over the nine years it has had a big stake – will no longer be in the picture. 

BP hauled in £27billion of cash in two decades from its Russian enterprises but it should have been obvious that they were packed with ethical and financial risk. 

In its eagerness to embrace Russian oil, BP put profits before moral scruples and is paying heavily. The company is now facing its worst crisis since the catastrophic Gulf of Mexico oil spill a decade ago. 

The episode also casts an unflattering light on the virtue-signalling nature of much ESG – environmental, social and governance – investment activity. Woke campaigners were so obsessed with the environment they entirely overlooked the Kremlin. 

BP has been shunned by, among others, the Royal Shakespeare Company, which broke off relations on the grounds of greenery. No mention from the luvvies of cosying up to a blood-sodden dictator in Moscow. 

The high price and complications of cutting ties with Rosneft may be why Looney seemed hesitant last week. 

We are all affected by this: millions of Britons have a financial interest in BP through our ISAs and pensions. Most of us, I suspect, consider the write-offs a price worth paying to ensure our savings are not helping put fuel in tanks rolling into Ukraine.


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