February 28, 2022
Oil giant BP says it will exit its $25 billion stake in Rosneft, while leases for more than half of Russia’s 980 planes could be broken by foreign firms and the EU, Canada and Great Britain will close their airspace
BP opened a new front in the West’s campaign to insulate the Russian economy by deciding to withdraw from its Russian oil and gas investments, the most aggressive move ever made by a company in response to the invasion of Russia. Ukraine via Moscow.
Western allies have stepped up efforts to punish Russia by closing airspace to Russian planes, shutting down some banks in the SWIFT financial network and limiting Moscow’s ability to deploy its $630 billion in foreign exchange reserves, all measures that should hammer the economy.
The ruble plunged as much as 30% to an all-time low against the dollar on Monday, prompting the central bank to more than double its key rate to 20% to support it.
BP, Russia’s biggest foreign investor, said it was dumping its stake in state-controlled energy company Rosneft at a cost of up to $25 billion, halving the country’s oil and gas reserves. British company.
The move sheds light on other Western companies with operations in Russia, including BP rivals such as France’s TotalEnergies and Britain’s Shell, amid pressure from governments to tighten financial screws on Moscow after launching the largest assault on a European country since World War II. .
Equinor, the Norwegian state-majority energy company, said on Monday it would begin divesting its joint ventures in Russia. Norway’s sovereign wealth fund, the world’s largest, will also divest its Russian assets, worth around 25 billion Norwegian kroner ($2.8 billion).
Australia’s sovereign wealth fund also said it planned to reduce its exposure to companies listed in Russia.
Much of Russia’s economy will be a no-go zone for Western banks and financial firms after the decision to cut off some of its banks from SWIFT, a secure messaging system used for billions of dollars in transactions around the world.
Even neutral Switzerland is likely to follow the EU in imposing sanctions on Russia and freezing Russian assets, its president said on Sunday.
Russians lined up at ATMs over the weekend, fearing sanctions could trigger cash shortages.
Western companies exposed to Russia were also penalized. Shares fell in Societe Generale, the French bank that owns Russia’s Rosbank, and automaker Renault, which controls Russian automaker Avtovaz.
Finnair fell 21% after withdrawing its 2022 forecast due to the potential closure of Russian airspace.
The EU banned Russian media RT and Sputnik, while Canadian telecom operators also stopped offering the RT channel. Google has banned RT and other Russian channels from receiving money for ads on websites, apps and YouTube videos, similar to a decision by Facebook.
The European Union’s internal market chief on Sunday called on the chief executives of Google-owner Alphabet and its YouTube unit to ban users from making wartime propaganda as part of moves to end to misinformation about Ukraine.
Aircraft rental, airlines will take a big hit
Lessors are set to terminate hundreds of aircraft lease contracts with Russian airlines following Western sanctions over the invasion of Ukraine that require the contracts to be canceled.
Asian lessor BOC Aviation said on Monday that most of its planes in Russia would be affected by European Union sanctions that require leases to be terminated by March 28.
Russian companies have 980 passenger planes in service, of which 777 are leased, according to analytics firm Cirium. Of these, two-thirds, or 515 jets, with an estimated market value of around $10 billion, are leased to foreign companies in the industry mainly based in Ireland.
AerCap Holdings, the world’s largest leasing company, has the most exposure to Russia and Ukraine with 152 planes, according to aviation consultancy IBA.
AerCap said it would cease its leasing business with Russian airlines in line with sanctions, adding that as of December 31, 5% of its net book value fleet was leased to Russian carriers.
The lessor has more than 2,000 planes in its total portfolio and its Russian customers include Aeroflot, S7 Airlines, Rossiya, Azur Air and Ural Airlines, according to its website.
Meanwhile, European nations and Canada have also taken the unprecedented step of closing their airspace to Russian aircraft. The United States was considering a similar move, U.S. officials said.
Canada said on Sunday it was investigating a violation of its airspace by Russian airline Aeroflot.
US-based United Parcel Service and FedEx, two of the world’s largest logistics companies, announced they were suspending delivery services to Russia and Ukraine.
• Reuters with additional editing by Jim Pollard