Recently, it came to light that ExxonMobil had been in secret discussions with Russian officials regarding a potential return to the country.
However, the company’s CEO stated earlier this month that ExxonMobil has no intention of going back to Russia. Instead, the discussions centered around retrieving over $4 billion in assets that the Kremlin had seized.
There’s a sense among many analysts that large Western companies, particularly those that had to write down the $4 billion loss after Russia’s full-scale invasion in February 2022, might contemplate a return to the Russian market.
With ExxonMobil denying any plans to return, one can’t help but wonder what a move back to Russia would mean for the company, often considered the world’s largest privately owned oil and gas enterprise.
The company has gained recognition for its technical expertise and has successfully implemented various challenging energy projects globally. It’s regarded as a solid investment, sometimes referred to as a “Widow and Orphan Stock” because of its robust dividend yields and long-term financial growth.
Despite being a target for environmental organizations, ExxonMobil has worked hard to overcome its historical challenges, such as the infamous Exxon Valdez oil spill in 1988, raising operational integrity standards in demanding environments.
One notable achievement is the Sakhalin I Project in Russia’s Far East, which is often cited as an exemplary case of project management. The company was proud to bring this project online without any adverse environmental impact or budget overruns.
This success laid the groundwork for a deeper collaboration between ExxonMobil and Rosneft, the state-owned Russian oil company, particularly leading to significant oil discoveries in the Kara Sea. However, issues began when Russia annexed Crimea in 2014, leading to sanctions that hampered operations in the Kara Sea.
After the invasion of Ukraine and subsequent sanctions on Russia’s energy sector—including those targeting Rosneft—ExxonMobil pulled out of the region completely.
In retaliation, Russia seized the company’s stakes in Sakhalin I, whereas ExxonMobil pursued major projects in other locations with notable success.
So, what would a return to Russia entail?
For starters, the U.S. would need to lift sanctions affecting Russia’s energy sector, which would require legislative action for some of the laws in place. Even if sanctions were lifted, ExxonMobil would have to consider the repercussions of flouting regulations in countries where it has significant operations, such as the EU, UK, Canada, and Australia.
The political landscape in Russia also poses challenges. Investors, including those from “unfriendly countries,” might face unpredictable treatment from the government. Companies would likely need to establish partnerships with Russian firms to return, significantly complicating matters for ExxonMobil.
Additionally, the relationship dynamics between political leaders can greatly impact business. Historical ties between Trump and Putin have shifted over time, and the current climate is uncertain.
ExxonMobil has already faced setbacks, such as being unable to sell gas from the Sakhalin I project at market prices due to Russian government interference, despite prior agreements indicating otherwise.
Furthermore, returning to Russia could harm ExxonMobil’s reputation. Putin would likely seek a public relations boost through a grand re-entry event, which could be problematic, especially given the stark contrast between oil spills in the past and the current geopolitical bloodshed surrounding the situation.
Ultimately, it seems prudent for ExxonMobil to maintain its distance from Russia amid these heightened tensions.
