British oil major BP announced Sunday that it is divesting its 20 percent stake in state-controlled Russian oil and gas company Rosneft.
BP, once one of the largest foreign investors in Russia, will be voluntarily accepting a financial hit in order to dispose of its holdings in Rosneft. Additionally, BP CEO Bernard Looney and former BP CEO Bob Dudley are resigning from the board of Rosneft, effective immediately.
The stunning move comes as Russia finds itself increasingly isolated from routine commercial relationships with the West. In the span of four days, the Kremlin's decision to invade Ukraine has turned Russia into an international pariah - its commercial banks disconnected from the world's financial system, its central bank reserves cut off and its state media organs banned in multiple nations. Even Switzerland, which has been neutral in every conflict since 1815, has announced that it is "very probable" that it will begin freezing Russian assets beginning Monday.
“Russia’s attack on Ukraine is an act of aggression which is having tragic consequences across the region," BP chairman Helge Lund said. "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.”
"Like so many, I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected," said BP CEO Bernard Looney. "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."
The exit will result in an accounting treatment change, with a material effect on the next quarterly earnings statement, and a $2 billion reduction in future earnings from operations. However, BP still expects 7-9 percent earnings per share growth and four percent annual increase in dividends per share through 2025.
Top image: Rosneft headquarters (NVO / CC BY 3.0)
