The government faces growing criticism after a company backed by two sanctioned Russian oligarchs was allowed to become a part-owner of the UK’s largest North Sea oil producer.
Critics of the decision to allow LetterOne, the investment company part-owned by oligarchs Mikhail Fridman and Petr Aven, to acquire almost 15% of Aberdeen-based Harbour Energy, warned that oligarchs should have no place owning critical national assets.
LetterOne, which is not itself sanctioned, received shares in Harbour after the North Sea company completed an £8.5bn deal to buy the German company Wintershall, which counted LetterOne among its owners.
The investment company’s shares in Wintershall were exchanged for shares in Harbour, which has been a vocal critic of the government’s windfall tax. Harbour is expected to expand its oil and gas production beyond UK waters by half a million barrels of oil a day as a result of the deal.
Under the terms of the acquisition, LetterOne, chaired by Mervyn Davies, a former banker and ex-Labour government minister, will receive a share of Harbour’s profits paid as dividends.
Fridman and Aven are still major shareholders, although their stakes were frozen when the UK and EU imposed sanctions after the Russian invasion of Ukraine in early 2022.
At the time, Lord Davies said the pair would no longer have any involvement with or influence over the business or its investments, which includes voting rights related to Harbour Energy. The peer also said they would not receive dividends, funds or economic resources, either directly or indirectly.
In December 2022, the UK government used the National Security and Investment Act to order LetterOne to sell its stake in regional broadband provider Upp, saying its ownership of the expanding full-fibre broadband networks was a national security risk.
The Harbour-Wintershall deal was cleared by the government under the same act, which makes clear that ministers could take further action if there were any change to the deal that would give LetterOne a greater share of the company or a seat on the board.
The billionaires are expected to be removed from the EU sanctions list after they successfully challenged the sanctions in EU courts this year, describing them as “spurious and unfounded”. They remain on the sanctions list of the UK, where the two men resided before the war.
Alicia Kearns MP, the shadow minister for foreign affairs, said the Labour government’s decision to approve the deal was “astounding and appalling”. She called on the government to reverse the decision immediately and make a statement “explaining how consent was given in the first place”.
“For Labour to consent to oligarchical ownership of such a key national asset is beyond comprehension – energy security is a serious national security issue,” Kearns said. “It is particularly insulting this week following the devastation in Ukraine from Russian strikes on civilians, including schoolchildren and hospital patients.”
Louis Wilson, the head of fossil fuel investigations at Global Witness, added that the UK government and Harbour “should have run a mile from this deal”.
“A company part-owned by sanctioned Russian oligarchs, which the Tories considered too much of a security risk to own a few thousand UK broadband connections, has been given a big chunk of the UK’s biggest oil producer. Oligarchs should have no place in the UK’s energy industry,” Wilson said.
A LetterOne spokesperson said the company was “proud to be part of a bigger, stronger UK energy business” that would “bolster energy security, increase investment and create jobs while helping deliver the nation’s ambitious energy transition goals”.
Harbour Energy declined to comment.
