Putin makes Exxon’s exit difficult


On Monday, Oct 17, Exxon Mobil Corp announced that it would withdraw all operations in Russia after President Vladimir Putin confiscated it’s properties after seven months of dialogue over a regulated transfer of 30% of it’s share in a crucial oil project.

Exxon maintained silence on whether it had received any reimbursement for the assets which estimated more than 4 billion dollars. The spokesperson refused to comment about the company’s interest to proceed forward and challenge the expropriation through international intervention, a prospect that was formerly raised in August. The withdrawal indicates the deepening rift between Russia and the West over fuel and the former’s invasion on Ukraine in February, following a warning to use nuclear arms against Ukraine and it’s allies. Other energy companies have either transferred their assets to Russia or terminated their operations in the country.

Exxon stated that it had safely departed from Russia post orders of unilateral seizure by the Putin government. So far, the company has been trying to renounce its operations in Sakhalin 1, ever since it publicly gave up all its assets on March 1, thus leaving a hope to sell Sakhalin. Apparently the company is likely to integrate the transfer of operations with other partners such as Russian Rosneft, Japan’s SODECO and Indian Oil and Natural Gas Corporation to make sure that it happens safely. India’s ONGC is all set to buy a stake in the entity that will take over the Sakhalin 1 project. It looks forward to have a 20% share in the asset.

Japan’s industry minister Yasutoshi Nishimura said that Japan will be able to come to a decision on Sakhalin 1 only after a discussion with its partners, and once it reviews the details of the order by Moscow. According to the order given by Putin on October 7, the foreign partners of the project can request the government for shares after a new Russian company takes over it. The order also led to the seizure of Exxon’s shares in the joint venture and automatically transferred it to hands of the government. According to the company, Putin’s first decree which was issued on August 1, had complicated their smooth exit from the Russian grounds. To counter this order, Exxon also issued a “note of difference” against Russia, and further laying a foundation for a judicial trial in Europe.

Exxon had noticeably limited it’s presence in Russia following sanctions after the annexation of the Crimean Peninsula in 2014. In the beginning of this year, the company removed its expatriate employees and shut down its chemical and lubricant businesses in all parts of Russia, which dropped the output of Sakhalin 1 from 220,000 barrels per day to 10000 barrels per day. This output was only sufficient to keep the lights on in the cities of Vladivostok and Khabarovsk. The 700 Russian employees who continued to work with the company will be moved to the new company that acquires the asset.