Exxon fully withdraws from Russia after Putin seizes assets

Authored by cbsnews.com and submitted by terrykiow
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Exxon Mobil on Monday said it has fully exited Russia, with the energy giant saying that President Vladimir Putin had expropriated its assets in the country and "unilaterally terminated" the company's Sakhalin-1 oil project.

"With two decrees, the Russian government has unilaterally terminated our interests in Sakhalin-1, and the project has been transferred to a Russian operator," an Exxon Mobil spokeswoman said.

She didn't disclose whether Exxon received compensation for the assets, but added that Exxon plans to reserve its legal rights under international law and its production-sharing agreement to pursue remedies.

Russia's move to seize Exxon's assets come after seven months of negotiations over a transfer of the company's stake in the Sakhalin-1 project, according to Reuters, which first reported on Exxon's move to complete its withdrawal from the country.

"We made every effort to engage with the Russian government and other stakeholders," an Exxon spokesperson told the news service.

In March, the energy giant announced it planned to exit Russia in response to the nation's invasion of Ukraine and that it would not make any new investments in Russia.

Exxon's Russia holdings were valued at more than $4 billion as of 2021, according to company documents. The Sakhalin-1 project, which Exxon has managed since 2005, has generated $16 billion for the Russian government, according to Exxon.

Earlier this year, Exxon took a $3.4 billion after-tax charge for its Sakhalin-1 assets. It also said the operations represented less than 2% of its total 2021 production, or about 65,000 barrels per day, and 1% of its operating earnings.

The fallout from the Sakhalin-1 project highlights the clash between Western nations and Russia over Putin's invasion of Ukraine earlier this year. The U.S. and other Western democracies have imposed sanctions against Russia in response to the invasion, aiming to weaken the country's economy, which is largely dependent on energy exports.

Russia, one of the world's top three crude producers, joined with other members of OPEC+ earlier this month to sharply cut production to support sagging oil prices. Economists believe such a move could deal the struggling global economy another blow, while also raising politically sensitive gas pump prices for U.S. drivers just ahead of key national elections.

bombayblue on October 17th, 2022 at 22:56 UTC »

I actually did a paper on this in college. Exxon (then under Rex Tillerson) basically stood back and watched BP try and sign an agreement to help Russia develop new oil fields. Once the facilities were in place Russia basically made up some trumped up tax charges and seized all the assets back from BP.

Exxon was smarter and essentially offered Russia a trade via a Production Services Agreement. They would give Russia some mature oil facilities in Texas/ Gulf of Mexico in return for ownership of their own facilities in Russia. The implicit understanding here was that Russia wouldn’t fuck over Exxon like they did BP because Exxon could just seize Russias shit in return. It worked and it’s one of the reasons Putin gave Rex Tillerson a medal.

However, ever since 2014 Exxon saw that sanctions and global opinion were going to turn against Russia so they’ve been slowly winding down their operations ever since.

During the recent invasion of Ukraine Exxon was frantically trying to sell its remaining assets to a company still doing business with Russia (AKA a Japanese or Indian or Russian company). That didn’t work and Putin ended up straight up seizing them anyways. I should note that Putin ended up seizing the Indian and Japanese assets in Sakhalin this week as well.

The TL;DR here is that even when this war ends Russia is going to find it very difficult to do business again.

Edit: since this is getting attention read Putins Kleptocracy by Karen Dawisha if you want to really understand how Russia operates economically.

dak4ttack on October 17th, 2022 at 22:44 UTC »

"fully withdraws after having assets seized." - "the man walked away with nothing after being robbed." - I feel like the robbery has more import than the walking away part.

BaronVonNacho on October 17th, 2022 at 21:16 UTC »

The damage Putin did to Russia is going to stay long after the Russian invasion of Ukraine ends.

International companies don't like investing in countries which can randomly decide to seize their assets and infrastructure. Even if the Russians shrug off Putin, the long term consequences of this are going to result in Russia struggling harder for foreign investment.

No amount of promises of financial gain can sugar-coat the fears the government might say "fuck it" and take your stuff. Nobody would invest in that.