BP suffers effects from sanctions on Russia

BP’s third-quarter results took a hit from declining oil prices and a sharp drop in income from Russia as Western sanctions on Moscow led to a slump in earnings from the oil major’s local partner, Kremlin-controlled Rosneft.

BP’s overall profits were broadly in line with expectations at $3bn but down nearly a fifth year-on-year. Its stock posted modest gains as investors welcomed a 5.3 per cent year-on-year increase in dividends to 10 cents per share.

“Despite the positive financial results the company still faces two significant headwinds – in Russia and liabilities over the 2010 Gulf of Mexico oil spill,” said Iain Reid, analyst at investment bank BMO.

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BP, a major investor in Russia through a 19.75 per cent stake in state oil major Rosneft, said the fall of the rouble against the dollar currencies had a significant impact on results.

Underlying net income from Rosneft for the quarter was $110m compared with $808m a year earlier.

The rouble has lost more than a fifth of its value since the start of the year as the Kremlin fights capital outflows and lower oil prices, while local businesses have been shut off from Western lending by sanctions.

The United States and the European Union hit Russia with economic sanctions over Moscow’s intervention in Ukraine.

The latest sanctions hit long-term financing and joint projects with Western companies in the Arctic, and shale developments.