This page provides the background on BP’s close collaboration with the Russian state oil company, Rosneft. For other pages in Crude Connections, click below:

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Spills, scandals and Sechin

BP has been a major investor in Russia over the last twenty-five years and holds a major stake in state oil company Rosneft, making it the largest shareholder after the Russian government. Russia accounts for around a third of BP’s production, and a quarter of the company’s profits.

Rosneft has a deplorable safety record and has been widely accused of environmental crimes. It is responsible for thousands of oil spills every year.

The company’s CEO, Igor Sechin, is close to Putin, and one of the most powerful figures in the country, despite being placed under US sanctions over the Ukrainian conflict and having his travel restricted and his assets frozen. The company is currently embroiled in a high-profile corruption scandal that has seen a former economy minister jailed for eight years.

Scroll down for more details about BP, Rosneft and the close relationship between the two companies, including:

1. An introduction to Rosneft
2. Rosneft’s environmental impacts
3. BP and Rosneft
4. Igor Sechin and corruption
   
5. Sanctions

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An introduction to Rosneft

Rosneft is Russia’s largest oil company, operating across Siberia, the Volga, the Ural regions, the Far East, coastal areas, and the Arctic shelf and controlling about 40% of the country’s oil production. It is the world’s second largest publicly traded oil company, operating in many other countries, including Venezuela, Cuba, Brazil, Mongolia, China, Turkmenistan, Egypt, Iraq and Indonesia.

In recent years, Rosneft has characterized itself by signing deals laden with geopolitical risks, such as with the Kurdish regional government and the Venezuelan state. It is currently scoping opportunities in Iran. Journalistic investigations have also linked Rosneft to the manipulation of Armenian court rulings.

The company is pioneering oil exploration and extraction in Russia’s Arctic, including through partnerships with European and American oil firms.

Rosneft’s environmental impacts

Rosneft has been widely accused of environmental crimes, particularly related to oil spills and the dumping of environmental waste.

Russia leads global statistics for oil spills: the national industry spills over thirty million barrels a year, the equivalent of seven Deepwater Horizons. Rosneft is the worst offender, with thousands of annual incidents.

• In 2011, a federal watchdog reported 2,727 Rosneft oil spills in the oil-producing region of Khanty-Mansiisk.
• In 2014, a major oil spill near the city of Nefteyugansk poured oil over the equivalent of a hundred football fields, polluting the land of local farmers and residents.
• In 2015, spills from Rosneft subsidiary RN Yuganskneftegas infamously caused oil to seep from residential taps outside Nefteyugansk.
• The company’s own official data for 2013 documented over 6,000 annual spills, but these are likely to be underestimates.
• Rosneft subsidiaries, such as SeverNeft and RN-Sakhalinmorneftegaz, have been linked to spills and impacts on local populations around Sakhalin Island, the Nenets Autonomous Okrug and the Komi Republic. The lives and livelihoods of Indigenous populations have been particularly affected by oil spills in these regions.

 

Environmental organisations have criticised the interference of Rosneft’s exploratory activities, particularly its seismic tests, in fragile Arctic ecosystems. Federal authorities have also opened cases against Rosneft for violating regulations around the protection of water bodies.

BP and Rosneft

BP holds a 19.75% stake in Rosneft and has two seats on the board. This makes it the largest and most influential shareholder after the Russian government. QHG Shares owns another 19.5% stake, and the remaining shares float on the market. BP’s CEO Bob Dudley sits on Rosneft’s Board of Directors, along with Guillermo Quintero, who was President of BP Energy do Brasil Ltda and BP Brazil until 2015.

In recent years, Rosneft has accounted for around a third of BP’s output, and a quarter of the company’s profits. The two companies also have a long history of joint ventures, additional to the company stake, stemming back to 2006.

Current joint ventures include the development of the Kharampurskoye natural gas and condensate field, and the creation of the Yermak Neftegaz onshore exploration venture. Most recently, the two companies agreed to develop two oil and gas license areas in the Arctic region of Yamal-Nenets.

As BP’s strategic focus tilts towards gas, further agreements between the two companies involve long-term plans for BP to expand its delivery of Russian gas to European markets.

Igor Sechin and corruption

Igor Sechin is Rosneft’s CEO. Previously the deputy prime minister of Russia and a former KGB operative, Sechin is widely recognised as one of the closest figures to Russian president Vladimir Putin, and one of the most powerful in the country. He is one of Russia’s best paid chief executives, earning an annual $50m salary for his work at Rosneft. In 2014, Sechin was placed under US sanctions over the Ukrainian conflict. His travel was restricted and his assets frozen.

In 2016, Sechin was linked by Russian newspaper Novaya Gazeta to one of the world’s most expensive yachts, whose annual operating costs exceed his estimated salary. Sechin’s wife, implicated in the revelations, took Novaya Gazeta to court. Sechin himself sued newspaper Vedomosti earlier in the year for writing about his new $60m palatial home, demanding it destroy the newspaper’s print run.

Accusations of corruption have long swirled around Rosneft and Sechin. Recently, the company found itself at the centre of the startling legal case of Alexey Ulyukaev, a former government minister accused of demanding a bribe from Rosneft. Commentators have suggested that the case was orchestrated by Sechin himself and is a rare public glimpse of the political infighting that is rife within the Kremlin. Many believe that Rosneft did indeed play a role in threatening and extorting officials to approve a share acquisition deal with the oil company Bashneft. In December, Ulyukaev was sentenced by a Moscow court to eight years in prison and ordered to pay a fine of $2.2 million. Sechin refused to appear in court despite being a key witness in the investigation of Ulyukaev.

The Steele dossier (the unconfirmed intelligence document published last year containing serious and salacious allegations about Trump’s collusion with Russia) also includes information that Igor Sechin met Trump aide Carter Page in mid-2016 to push for the lifting of sanctions, in order to allow for partnerships between Russian and US oil firms.  

Sanctions

In the wake of the Russia-Ukraine conflict, both the United States and the European Union introduced economic sanctions aimed at restricting the operations of particular Russian industries and Western companies operating in Russia, including around unconventional oil extraction such as fracking shale deposits. Various firms and prominent individuals were subject to asset freezes and travel bans, including Sechin.

BP, along with other oil majors and trade associations, have vociferously lobbied and pushed back against the sanctions related to energy. Over the years, the sanctions have been modified, extended, and are continuously debated. Loopholes and nebulous wording has allowed for companies such as BP and Rosneft to largely continue with business as usual. For example, Rosneft has reclassified a shale deposit as a limestone deposit in an attempt to avoid the sanctions’ restrictions. Now, meeting notes released under the Freedom of Information Act suggest that BP may be thinking of doing the same.

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This material was kindly researched and collated by Daniel Macmillen Voskoboynik.