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: Exxon Mobil under pressure to exit Russian ventures

Exxon Mobil Corp. is under renewed pressure to follow other integrated oil giants and end its participation in massive oil and gas projects in Russia.

Under pressure from shareholders and the public at large, BP PLC
BP,
-2.84%

and Shell PLC
SHEL,
-1.50%

recently announced the end of their participation in projects with Russian state-owned oil and gas companies following the invasion of Ukraine.

Exxon
XOM,
+0.72%

has operated in Russia for a quarter century. It has more than 1,000 employees in the country, although according to media reports it has accelerated the evacuation of its workers there. One of its major ventures involves a subsidiary that has operated an oil and gas project in the far eastern island of Sakhalin since 1995, with the Exxon unit holding a 30% interest.

Exxon did not immediately return a request for comment on Tuesday about its projects in Russia and whether it would follow Shell and BP’s lead.

The company has set its virtual investment day for Wednesday, with a webcast session slated to begin at 9 a.m. Eastern.

Such events at Exxon are tightly scripted, but it is likely that Chief Executive Darren Woods will get questions about what Exxon intends to do with its assets in Russia.

Exxon had several joint ventures with Russia’s Rosneft, the state-owned energy integrated company, but with sanctions imposed on Russia following the Crimea annexation in 2014, it completed a formal withdraw from the JVs in 2018.

“Thus far, governmental sanctions have not targeted Russia’s energy sector in a substantial way,” Raymond James analyst Pavel Molchanov told MarketWatch.

“Ukraine is asking the European Union to impose a direct embargo on imports of Russian oil and gas, but that seems unlikely,” he said. “On the other hand, private-sector energy companies are feeling shareholder pressure to reduce or even eliminate exposure to Russia.”

More companies are like to announce divestment steps, he said. The removal of banking and insurance services would be more a more direct way to act, Molchanov said.

See also: Chevron to take a lead in biofuels with deal to buy Renewable Energy Group

“While divestment tends to get more public attention, the fact of the matter is that it is essentially a symbolic step: simply changing shareholder A to shareholder B. Nothing fundamentally happens to the underlying business,” he said. That’s not the case when banks or insurers refuse to provide actual services.

“Just as foreign central banks will no longer cooperate with Russia’s central bank, it would be a big deal for major international commercial banks to stop working with Gazprom, Rosneft, or Lukoil,” he said.

While the EU and the U.S have cut Russia from the SWIFT interbanking system, cryptocurrencies could fill some of the gaps, said Naeem Aslam, a market analyst at AvaTrade.

Related: Russia’s credit rating cut to junk by S&P as other agencies mull or take downgrade action

Traders will be looking at other oil and energy companies, and they will be anticipating a similar move by them following BP and Shell moves, he said.

In addition to Exxon, France’s TotalEnergies SE
TTE,
-3.13%
,
another multinational integrated energy company, is also most likely to make a similar announcement, he said.

Exxon recently announced a major reorganization, looking to save costs and bringing its chemicals and refining businesses under one umbrella.

Shares of Exxon have gained nearly 40% in the past 12 months, which compares with gains of around 10% for the S&P 500 index
SPX,
-1.75%

and of 42% for the Energy Select Sector SPDR ETF.
XLE,
+0.21%

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