Make fossil fuel giants use their Russian profits to rebuild Ukraine
At the annual Ukraine Recovery Conference, hosted by the UK, we are likely to hear the same message over and over: Ukraine needs to be rebuilt, and the private sector will be crucial in making this happen.
What you will not hear is this: there are already huge sums of money in the private sector that could be used. The oil and gas industry have made huge profits from the war that has torn Ukraine apart, and it continues to help Russia export its oil and gas around the world.
But let’s rewind for a second. It is well known that at the beginning of the Russian invasion of Ukraine many big oil companies, including BP, Shell, TotalEnergies and others, pledged to pull out of Russia and stop trading with the Kremlin. What is lesser known is the extent to which this pledge has been something of a farce.
Total and BP still own significant parts of Russian oil and gas companies and projects – and continue to be paid enormous dividends enlarged by the war. At the end of last year the Kremlin-owned energy company Rosneft announced that it would pay its shareholders more than $3.6 billion for the first nine months of the year. That meant BP was set to net an estimated $722 million in its first wartime Russian pay day, even if the company said it would not recognise the money. BP’s Russian oil profits last year amounted to more than a third of the budgetary assistance the UK government gave to Ukraine that year.
Shell isn’t much better. It stands to net more than $1 billion after the Russian gas company Novatek bid for Shell’s stake in Sakhalin-II, a big oil and gas development in the Far East. For perspective, this money would cover more than 10 per cent of the direct damage done to Ukraine’s energy infrastructure by Russian attacks. During its annual meeting on May 23 Shell refused to answer a question on what it would do with this money.
However, it is also true that after the opportunistic purchase of a discounted cargo of Russian crude oil as tanks were bearing down on Kyiv Shell apologised and gave the profits from the transaction to humanitarian programmes in Ukraine (it also swore off Russian oil and gas for good). The money, and the precedent it set, was welcome, but it should not be up to individual companies to pick and choose when they feel like handing over their wartime profits to the Ukrainian reconstruction efforts.
The West’s continued involvement in the Russian oil trade will come as a surprise to many people. Since sanctions were introduced in December last year the common public perception is that western countries have severed ties with Russian fossil fuels. This is simply untrue. Many ships that transport Russian crude are western owned, or sail under western insurance, meaning that western companies are actively enabling the trade of Russian oil.
All of this amounts to something that smells like rank hypocrisy: while talking about reconstructing Ukraine, western companies are funding the war.
Ukrainian campaigners rightly call the money made from Russia during the invasion of Ukraine blood money. Western policymakers should listen to this and to the Ukrainian government’s calls to redirect this money. These governments should tax post-invasion Russian profits, dividends and asset sales from oil and gas companies at 100 per cent and redirect them to the green reconstruction of Ukraine.
It’s all well and good for the private sector to contribute to the rebuilding of Ukraine and there will surely be many worthy proposals at the conference this week. But a big pot of money already exists, and at the moment it exists as blood money. It’s time to put it to proper use. Western governments must legislate to ensure that any assets brought back from Russia by companies during this war go to the people of Ukraine, not to shareholders.