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British Petroleum divests from Russian state-owned oil ventures

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Photo by Matt Cardy/Getty Images

The British Petroleum Company (BP) plans to sell its nearly one-fifth stake in the state-owned Russian oil company Rosneft.

BP plans to liquidate its 19.75% stake in Rosneft “with immediate effect” following the Russian invasion of Ukraine, Sky News reported.

Bernard Looney, BP’s chief executive, will also resign from his role on Rosneft’s board along with another BP executive, Bub Dudley.

The chairman for BP, 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,” Lund continued, “We can no longer support BP representatives holding a role on the Rosneft board.”

He added, “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.”

Russia’s economy has been in a freefall since the beginning of its invasion of Ukraine.

In response to the Russian invasion, leaders of Western nations have proceeded to implement a wide array of sanctions on the Russian economy.

The Western sanctions specifically target Russia’s financial institutions. President Joe Biden issued sanctions that target Russia’s two largest banks, Sherbank and VTB, which will make it effectively impossible for Russians to conduct transactions through the American financial system.

Biden’s sanctions restrict nearly 80% of Russia’s banking assets.

On Saturday, the European Commission, France, Germany, Italy, Canada, the United Kingdom, and the United States issued a joint statement that announced their intention to remove Russia from the SWIFT telecommunication network.

Kicking Russia out of SWIFT will significantly damage the Russian economy and make long-term recovery incredibly difficult. This move will economically isolate Russia and prevent Russian businesses and banks from engaging in international transactions.

Natural gas and fossil fuel exports make up more than 80% of Russia’s GDP. Restricting Russia’s ability to sell fuel to the rest of the world will effectively cripple its economy.

The Russian ruble also continues to lose value rapidly.

To try and stabilize the cratering Russian economy, the Russian central bank said that it would intervene in the foreign exchange market and expand the list of securities that it is willing to accept as collateral.

Russia’s removal from SWIFT will put the Russian central bank in a tight bind as it will not be able to freely manipulate Russian monetary policy to offset inflation and the economic impact of Western sanctions.

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