TotalEnergies, the world’s fifth-largest oil company, has finally bowed to international pressure after the invasion of Ukraine and announced that it intends to “gradually withdraw” from its Russian investments.
The French oil giant said on Friday, it would remove its two representatives from the board of Novatek, Russia’s dominant private gas exporter.
Total has also written down the value of its 19.4% stake in Novatek, taking an impairment charge of $3.7bn (£3.1bn) in its accounts for the fourth quarter of 2022. However, the company said it was unable to sell its stake, given one of Novatek’s main shareholders is currently under western sanctions.
“Further to its principles of conduct defined for its activities in relation to Russia, published on 22 March 2022, TotalEnergies has gradually started to withdraw from its Russian assets while ensuring that it continues to supply gas to Europe,” the company said in a statement.
“TotalEnergies holds a 19.4% stake in the company Novatek, a stake that it cannot sell given the prevailing shareholders’ agreements, as it is forbidden for TotalEnergies to sell any asset to one of Novatek’s main shareholders who is under sanction.”
The oil trader and Vladimir Putin ally Gennady Timchenko, who has been under US sanctions since 2014, and was placed under EU and UK sanctions this year, owns 23.5% of Novatek. The company’s founder and chairman, Leonid Mikhelson, is under UK and Canadian sanctions but has not been blacklisted by the EU or the US.
TotalEnergies is an outlier among European oil companies in continuing to do business in Russia. BP, Shell and Equinor have all announced intentions to divest their stakes. BP wrote down the value of its 19.75% shareholding in Rosneft on 27 February, just three days after the invasion, taking a $25bn impairment.
However, it has been unable to sell its shares and Rosneft has continued setting aside dividends for BP, with $580m currently held in a Russian account. The same arrangement is expected to be applied to TotalEnergies, with dividends being paid into an escrow account in Russia.
Having resisted exiting Russia for almost 10 months since the invasion of Ukraine, the French firm has already received $748m in dividends from Novatek and another Russian asset this year, drawing criticism from Ukraine’s president Volodymyr Zelenskiy, who described the payments as “blood money”.
TotalEnergies retains direct stakes in two gas drilling and export ventures, Yamal LNG and Arctic LNG, both joint ventures with Novatek.
“The key questions from today’s release is why now and not earlier,” RBC analyst Biraj Borkhataria told Reuters. “The stake in Novatek was, in our view, potentially the least arduous of TotalEnergies’ interests to exit.”
The decision was greeted with caution by Ukraine. Oleg Ustenko, an economic adviser to the Ukrainian president, said: “It’s not the first time when we hear some nice messages coming from energy giants or other businesses, who say they are closing out on their Russian business investments. But we have to make sure that through actions, they are doing exactly as they were saying.”
The campaign group Global Witness, which has been urging the French company to cut ties with Russia, said: “After nine months, Total has finally accepted reality. Remaining invested in Russia did nothing for Europe’s long-term energy security and only strengthened the Kremlin as it commits war crimes in Ukraine. This doesn’t change the legal ownership of the Novatek shares, or future dividends. Total remains stuck with stranded assets which are deeply connected to the war in Ukraine.’’
