BP is exiting its stake in Russian state-owned oil company Rosneft, days after coming under pressure from the UK government over its involvement with Russia.

The London-headquartered oil firm announced on Sunday that it was offloading its 19.75% voting stake in Rosneft, after Russia’s invasion of Ukraine represented a “fundamental change” in relations with Moscow.

The value of the stake was estimated at $14bn (£10.4bn) at the end of last year. It is unclear who BP would sell it to.

The oil firm’s chief executive, Bernard Looney, is also resigning from the Rosneft board with “immediate effect”, it said in a statement.

Former BP chief executive Bob Dudley has also resigned from the Rosneft board, which is chaired by the former German chancellor, Gerhard Schröder, and run by Igor Sechin, a close ally of president Vladimir Putin.

BP’s chairman, Helge 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”.

The UK business secretary, Kwasi Kwarteng, who had held a virtual call with Looney on Friday to discuss the government’s concern over the company’s involvement in Russia, said he welcomed BP’s decision, adding that Moscow’s “unprovoked invasion of Ukraine must be a wake-up call for British businesses with commercial interests in [Vladimir] Putin’s Russia.”

The move will not be without significant financial repercussions for BP. As a result, the company said it would no longer recognise a share in Rosnet’s net income, production and reserves.

BP said it would write down up to $25bn at the end of the first quarter of 2022 following its exit, which it will report to investors in May.

The impact is likely to be lasting: Rosneft accounted for almost a fifth of BP’s bumper $12.8bn profits for 2021 in its latest set of annual results – contributing some $2.7bn.

BP has also benefited from Moscow’s manoeuvres over the past few months, which have helped to push up global energy prices.

Looney, who became BP’s chief executive in early 2020, said he was “deeply shocked and saddened by the situation unfolding in Ukraine”, which had “caused us to fundamentally rethink BP’s position with Rosneft”.

He added: “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.”

Together, BP and Rosneft had operated a “strategic partnership”, co-operating on research and on oil and gas projects such as Taas-Yuryakh in eastern Siberia.

BP’s relations with Russia go back several years, but the British government had only recently begun to voice concerns over the oil giant’s dealings with a Russian state-owned company.

In 2003, BP set up a joint venture, TNK-BP, under the leadership of former boss Bob Dudley and alongside a string of Russian oligarchs, which was dissolved a decade later to form Rosneft, with BP retaining its stake in the business, which it co-owns with the Russian government.

TNK-BP was caught in a series controversies during its 10 years of operations, with Dudley forced to flee Moscow in 2008 after an “orchestrated campaign of harassment” by Russian state agencies.

BP’s ultimate decision to walk away from Rosneft underlines the mounting pressure on firms to put an end to their business dealings with Russia.

The UK, along with the EU and US, has imposed a range of sanctions on Russian companies including banks, while the UK has banned the airline Aeroflot from landing in Britain.

However, until now there had been no impact on BP’s partnership with Rosneft, nor on the operations of rival oil firm Shell.

Shell works alongside Russia’s state-owned Gazprom on the Sakhalin II project, which included the building of Russia’s first liquefied natural gas (LNG) plant on Sakhalin island, located in the Sea of Okhotsk in Russia’s far east.

Extracted in full from: BP to offload $14bn stake in Russian state oil firm Rosneft after UK pressure | BP | The Guardian

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