BP is just the latest major oil company to provoke political outrage after reporting its highest profits since 2013, fuelled by a year of record-breaking energy market prices that are adding to the UK cost of living crisis.
But the perception that BP has profiteered from the energy crisis has another dimension compared with similar accusations levelled against its peers.
The company’s decades-long ties to the Kremlin, and its stake in Russia’s state-backed oil firm Rosneft, has raised concerns that BP has benefited financially from its alliance with Russia even as western powers threaten sanctions in response to its actions on Ukraine’s border.
BP owns almost a fifth of Rosneft, reflecting the company’s deep, and at times troubling, legacy ties to Russia.
In BP’s latest set of annual results the state oil company contributed $2.7bn in underlying profit to BP’s bottom line last year, up from just $56m the year before, or just over 21% of its bumper $12.8bn profit for the year. BP is also continuing to benefit from Moscow’s political manoeuvres, which have helped to ramp up global energy prices in recent months.
Under the leadership of former BP boss Bob Dudley, the oil firm set up a joint venture, TNK-BP, alongside a string of Russian oligarchs in 2003. It was dissolved 10 years later to form Rosneft, but not before Dudley was forced to flee Moscow in 2008 after an “orchestrated campaign of harassment” by Russian state agencies.
BP has nonetheless retained a 19.75% stake in the business, which is now run by Igor Sechin, a close ally of President Vladimir Putin, as well as seats on the board.
This is despite a series of diplomatic rows between Moscow and the west in recent years and threats of economic sanctions, over a range of flashpoints including Georgia, Crimea and eastern Ukraine.
The ties have been tested on climate grounds too after BP set out some of the most ambitious decarbonisation targets of any major oil company, while admitting they will not extend to their Rosneft stake.
BP chief executive Bernard Looney, the architect of its low-carbon ambitions, said on Thursday that the Rosneft alliance remains in place despite the fresh threat of sanctions against Russia by the EU and the US as the Kremlin flexes its military muscle on the border with Ukraine.
Global oil prices climbed by more than 50% last year to highs of $86 a barrel in October, before surging to seven-year highs of over $93 a barrel earlier this week amid fears that Russian forces amassed on the border of its western neighbour may move ahead with an invasion despite warnings from western powers.
The rising oil price is likely to put major fossil fuel companies on track for further bumper profits in the current financial quarter. They have also benefited from record gas market prices across Europe, which were ignited by a global gas squeeze and enflamed by a slowdown of Russian gas flows into Europe before winter as tensions with Kyiv began to mount.
“Russia is a large member of the energy system,” Looney told Bloomberg TV on Tuesday. “We avoid the politics, that serves us well in many countries around the world.” If sanctions were imposed on Russia then BP would comply, he added, “but for now, there is no change.”
If Looney plans to avoid getting involved in politics, Russia’s energy industry may not be the easiest place to be in the year ahead.
