June 21, 2024

Putin makes it difficult for foreign companies to exit

Putin makes it difficult for foreign companies to exit


In exceptional cases, Vladimir Putin can issue special permits.

Riga The head of the Kremlin, Vladimir Putin, is making it difficult for some foreign oil companies and banks to get out of business with Russia. Until December 31 of this year, investors from countries that Russia classifies as “unfriendly countries” will be prohibited from dealing in shares in some strategically important Russian energy and financial companies.

The Russian president signed a corresponding decree last Friday. The group of these countries includes all the countries of the European Union, the United States of America, the United Kingdom, South Korea and Taiwan.

Transactions in securities that constitute the registered capital, as well as rights and obligations or shares and contracts, on the basis of which investment projects are carried out in Russia, are affected by the ban.

However, the decree provides for a special role for the president: in exceptional cases, Putin can issue special permits, the document shows. Transactions that expire despite the ban are henceforth null and void.

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The country’s government now has ten days to submit a list of affected companies to Putin for approval. However, two explicit projects were mentioned in the text: the first, Sakhalin 1, an oil and natural gas production project near the island of Sakhalin in the Pacific Ocean, and secondly, the Charjaga oil field in northern Russia.

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Russian Oil: ExxonMobil and Total want to get rid of the property

In the case of Sakhalin 1, the American oil company ExxonMobil, which operates the field, was particularly affected. The company announced on March 1 that it would take steps to exit the project in response to Russia’s February 24 attack on Ukraine.

A few days before the decree was published, Exxon said it was in talks to transfer its 30 percent stake in Sakhalin 1 to an unnamed company. The oil company there produced about 227,000 barrels per day last year.

The much smaller Charjaga oil field produced about 31,000 barrels per day last year. France’s Total Energies announced in July that it would transfer its 20 percent stake in the field to Russian state-owned oil company Zarubezhneft, which runs the project. Norway’s Equinor, which owns 30 percent, said at the end of May it was leaving the field.

Foreign banks, also affected by the decree, have been trying for some time to withdraw from Russia due to the Russian invasion of Ukraine. But the Russian government is working to prevent the withdrawal of foreign credit institutions.

Only at the end of July, the main British bank HSBC, announced that it wants to sell its Russian business to Expobank. At the time it was said that completion of the deal still needed approval from the Russian authorities. No decision has been made on this yet.