As public pressure mounts, businesses in all industries have started to sever ties with Russia following their invasion of Ukraine. Major oil companies seem to have begun following suit. With more and more companies pulling out of the nation, it’s likely to cause a cascading effect on the nation’s economy.
BP, First of Many?
Following Russia’s attacks in Ukraine, BP, the UK-based oil company, became one of the first in its industry to pull out of the oil-rich nation. Initially, when Russian troops first began amassing at the border between the two nations, BP CEO Bernard Looney stated that there were no plans to reduce or eliminate their holdings in the state-owned oil company Rosneft. However, as Russian troops began to march into Ukraine, BP soon set into motion its plan to exit its investments in the nation. Both the CEO, Bernard Looney, and the company’s former CEO, Bob Dudley, stepped down from their positions on Rosneft’s board of directors. In its announcement, it attributes its move both to the Russian attacks on Ukraine and to their continued involvement in the nation no longer being in alignment with the long-term interests of the company. This move also seems to be an incredibly costly one for BP, as its partnership with the nation was estimated to produce a potential $25 billion for the company.
Shell Oil Joining BP
Shell, another UK-based oil company, followed suit shortly after BP’s announcement. In a public statement, it announced plans to exit from its investment in the Sakhalin-II project an oil and natural gas development located on the Sakhalin Islands. In his statement, CEO Ben van Beurden expressed shock at Russia’s attack on Ukraine, denouncing their military aggression. Shell will also be exiting several development projects located in Siberia. Included in the announcement, Shell also said it would likely incur financial losses from its exit of more than $3 billion in assets in the region. This comes at a time when the world seems united in an effort to isolate the Russian economy from the rest of the world’s trade and banking systems.
Russia’s Economy Suffers as Sanctions Pour In
While Russia’s oil industry may be suffering, it’s certainly not the only part of Russia’s economy under heavy scrutiny. During the first wave of sanctions levied against the nation, Russia’s stock market was paused, likely in an attempt to stymy the bleeding as the markets began to crash. While the market’s pause is still ongoing, it’s already surpassed all others as the longest pause in the market’s history. Russian oligarchs are feeling the pain as well, as the sanctions have begun hitting them exceptionally hard. Governments around the world have also begun shutting out the oligarchs from their personal bank accounts and seizing their property, most notably with western nations impounding their superyachts. Western nations also seem to be moving forward with isolating Russian banks from the SWIFT system, or The Society for Worldwide Interbank Financial Telecommunication, the main platform banks use to trade back and forth over international lines. A full-scale block-out would be unprecedented, with sanctions only having ever been applied against individual banks, generally for ties to terrorist groups in the middle-east.