Shares in BP slumped sharply after the markets opened lower again in London.
The oil giant initially dropped by as much as seven per cent, before moving back to roughly 5.58 per cent lower at 363p per share following its decision to sell its nearly 20% stake in Russian oil business Rosneft.
The FTSE 100 moved 1.02 per cent – or 79.3 points – lower to 7,412.4 points shortly after the markets opened.
Last night, BP confirmed it will ditch its near 20 per cent stake in Kremlin-backed energy giant Rosneft, following Russia’s invasion of Ukraine.
Both chief executive Bernard Looney and predecessor Bob Dudley will also resign from their positions on Rosneft’s board.
The UK-based gas giant has been under intense pressure to divest from Rosneft over recent days – with Looney holding a phone call with business secretary Kwasi Kwarteng amid growing Downing Street unease at the partnership between both companies.
The company has held a highly lucrative 19.75 per cent shareholding in Rosneft since 2013 – and has operated within Russia for 30 years.
By divesting, BP will conclude its business in the country, and sever financial ties with Rosneft.
This means it will stop taking a dividend in the company, which accounts for around half of BP’s oil and gas reserves and a third of its production.
The choice is highly costly, with BP anticipating a $25bn hit from the decision, which will be factored in at the end of the first quarter – when it is reported in May.
While Looney has previously argued BP prefers to “stick to business”, he said the Kremlin’s instigation of conflict in Ukraine has caused the company to “fundamentally rethink BP’s position with Rosneft.”
BP chair Helge Lund condemned the invasion as an “act of aggression.”
He explained: “It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue. “
City A.M. understands that BP is considering all options when it comes to offloading its stake.
BP has received praise for its decision from investment companies, such as Abdrn.
Andrew Millington, head of UK equities, Abrdn said:“We are strongly supportive of the board’s decision and applaud them for taking swift action following the events of the last week. While there may be a significant financial cost to BP in exiting Rosneft it is unquestionably the right thing to do”.