US sanctions raise concerns for foreign investors

Updated: 2014-04-30 09:29


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US sanctions raise concerns for foreign investors

 Ukraine crisis

LONDON - US sanctions targeting the president of Russia's largest oil company could complicate the operations of Western oil companies with important investments in Russia, such as BP and Exxon.

The sanctions target only Igor Sechin, the president of Rosneft, and not the company itself. That means BP, Exxon and others will be able to continue to work with Rosneft, one of the world's biggest oil companies, to explore for and produce oil and gas.

Analysts are worried that the sanctions by the US against Sechin are a prelude to tougher ones against Rosneft. That could force Western oil companies to abandon or suspend their partnerships and some very ambitious oil exploration plans.

"(Sechin) perhaps may not be able to go shopping in Paris in the foreseeable future, but that is not the same thing as penalizing the actual company," says Pavel Molchanov, an energy analyst at Raymond James. "That could be the next step, though."

Russian President Vladimir Putin warned late Tuesday that Western companies could eventually risk being shut out of Russia's energy sector.

Putin said he saw no reason for Russia to take retaliatory steps now against the US and European Union, as he said the Russian government has proposed.

But "if something like this continues, then of course we will need to think about who works and how they work in the Russian federation in key sectors of the Russian economy, including the energy sector," Putin said.

BP, based in London, owns a 20 percent stake in Rosneft. ExxonMobil, based in Irving, Texas, has a broad agreement with Rosneft to explore for oil in the Russian arctic and across a wide region of western Siberia. Eni of Italy and Statoil of Norway also have deals with the Russian company.

Western investor-owned oil companies and Rosneft, which is controlled by the Kremlin, need each other. These companies are in a constant struggle to find more oil and gas to replace what they produce and sell every day. Russia is one of the few countries in the world that harbor vast reserves of untapped hydrocarbons.

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