There’s a better solution for BP’s stake in Rosneft

Oil major BP Plc is to exit its shareholding in Russian oil company Rosneft PJSC. It should transfer its troublesome asset to a trust designed to put future dividends, or proceeds from a sale, to good use.
The current narrative seems to see only two alternatives for BP to offload its 19.75% shareholding in Rosneft — either find a buyer, or walk away from the shares. Both these options should be avoided.
It has become apparent that BP can no longer hold onto shares in a company whose majority owner is the Russian government. But if selling the stake is even possible, it would look terrible from a public-relations point of view. Simply relinquishing the holding would hand a huge windfall to President Vladimir Putin, not just in terms of the current value of the stock, but also in the future dividends that would accrue to the Kremlin, rather than to BP.
A better solution for BP, which would certainly be more positive from a corporate social responsibility perspective, would be to transfer the holding to a trust.
The trust would need to be completely separate from the company, as BP probably cannot be seen to have any involvement with its Russian investment. And the trust ought to have a humanitarian objective, given the circumstances of its creation. Future Rosneft dividends, or the proceeds of an eventual sale, could be handed to the United Nations. Perhaps the UN High Commissioner for Refugees would be the most appropriate beneficiary.
The Kremlin might not like that solution. It might order Rosneft to withhold future dividends, or it may even seize the shares currently held by BP. Either is possible, but both would mire the company in international litigation and perhaps put its assets outside of Russia at risk. Chief among these are its stakes in a slew of German refineries.
Other foreign oil companies, most notably Shell Plc and Exxon Mobil Corp, also have significant partnerships with Russian state-owned firms. Following BP’s move, they are likely to come under pressure to divest as well.
Shell holds a stake of 27.5% minus one share in the Sakhalin II oil and liquefied natural gas project. The majority owner of the project is Gazprom PJSC, controlled by the Russian government. A subsidiary of Exxon Mobil — Exxon Neftegaz Ltd — holds a 30% stake in and is the operator of the Sakhalin 1 project. Two affiliates of Rosneft own a 20% stake in the project.

—Bloomberg