After the invasion of Ukraine, Russia had secret allies helping it with millions of dollars in aid – American oil service companies

Major U.S. oil service providers supplied Russia with millions of dollars worth of equipment for months after its invasion of Ukraine, helping to sustain a vital part of its economy even as Western nations have launched sanctions aimed at starving the Russian war effort.

The largest – SLB, formerly Schlumberger – maintained and even slightly expanded its business after others left. It announced on Friday that it would stop exporting equipment there as the Associated Press prepared to publish a report on the companies’ Russian operations.

Russia imported more than 5,500 items worth more than $200 million from the top five US companies in the sector – led by SLB, Baker Hughes and Halliburton – in the year since the invasion began in February 2022. This is according to customs data obtained by B4Ukraine. and approved by the AP.

The technology has helped keep some of the world’s toughest oilfields running in a sector that provided nearly half of Russia’s federal revenue in 2021. Baker Hughes and Halliburton ended their Russian operations several months later. the invasion, but until last week, SLB was still selling technology. there.

It was “deeply shocking to see an American company continue to supply equipment to Russia’s oil and gas sector,” said Eleanor Nichol, executive director of B4Ukraine, a coalition of more than 80 nonprofits calling on multinationals to leave the country. Russian market.

The AP corresponded with SLB about exports over several months beginning in February and asked the company for a final comment on Wednesday. SLB announced two days later that it would halt technology and equipment shipments to Russia from all SLB facilities worldwide. The company said it was “in response to the continued expansion of international sanctions”, including new from the EU at the end of June.

In April, Ukraine categorized SLB as a “war sponsor,” a label aimed at deterring banks, investors and customers from doing business with firms still operating in Russia. Agiya Zagrebelska, Ukraine’s sanctions chief, told AP that SLB benefited financially by staying in Russia as its competitors left.

SLB spokeswoman Moira Duff dismissed the idea that SLB operations were effectively supporting the Russian war effort. She said SLB voluntarily reduced some activities starting the month after the invasion.

“Where international sanctions developments permit, we have continued to supply certain products,” Duff said ahead of last week’s announcement.

On Monday, Duff said SLB still had employees in Russia even though it would no longer be sending equipment there.

Halliburton ended its operations in Russia less than six months after the invasion “while prioritizing safety,” spokesman Brad Leone said. Baker Hughes announced the sale of its oil services business in Russia last August, six months after the invasion, and closed the deal three months later.

By contrast, oil majors including Exxon, Shell and BP rushed out of Russia after the invasion, announcing their decision to leave within days or weeks and writing off billions in assets. Their operations ended in the following months, although some assets remained blocked. BP wrote off $24.4 billion, Shell $4.2 billion and Exxon $4 billion, they said in public statements.

Oil service companies perform drilling and construction of wells, but generally do not produce fossil fuels themselves. SLB is by far the largest, with a market capitalization of around $81 billion.

Customs data shows that Russia imported 3,279 SLB items in the year after the invasion, worth nearly $60 million. The most expensive was a $3.5 million oil well monitoring system, which feeds operator data to optimize production.

Russia imported 712 items worth nearly $121 million from Baker Hughes and 1,399 items worth nearly $20 million from Halliburton, the data shows. The fourth-largest oil service provider in the United States, NOV, was a distant second with 153 items worth $831,000, and the fifth-largest, Noble Corp., did not ship any items after the invasion , according to the research.

Numbers can capture some items that were in transit before the war broke out. It does not include the value of work performed by employees or contractors of companies in Russia. SLB, for example, had 9,000 employees there in February.

Jeffrey Sonnenfeld, a Yale management professor and leader of an effort to determine whether companies have left Russia since the invasion, praised the big oil producers – BP, Exxon and Shell – for acting with “quick remarkable” to withdraw.

“In contrast, oil service companies, kicking and screaming, must have felt the sting of public urgings to phase out,” he said, though he added that the sale of Halliburton had taken a reasonable amount of time.

The Yale List assessed all oil majors and major US oil service companies that traded with Russia when the invasion began as having undertaken a “suspension” or “withdrawal”, except for SLB and France’s TotalEnergies , which are classified as “Buying Time”. Yale’s Steven Tian said there are no plans to change SLB’s rating at this time because the company is still doing business in Russia but not shipping new products or technologies.

Just days after the invasion, the US Department of Commerce banned companies from exporting critical oil extraction equipment, including items that could be used in deep waters, the Arctic or shale formations. , without a special license. A notice in the Federal Register said the move was intended to restrict Russia’s access to items to “support its military capabilities.” Allies including the UK and the EU have followed suit.

AP’s review found hundreds of items imported from SLB and Baker Hughes with codes matching the Commerce Restricted List, but there was no evidence that the items violated the ban, which says licenses are necessary, except in specific circumstances. Asked about a sample of the products, SLB said their items did not need licenses; Baker Hughes said it had obtained all required licenses. A Commerce spokesperson declined to comment on specific companies.

Whether the equipment was on restricted lists or not, oil experts said it would have been vital for Russia. Many of its oil fields are nearly depleted, offshore or under deep ice, requiring the specialized equipment and expertise that American companies are known for.

Adnan Vatansever, a specialist in Russian political economy at King’s College London and a former consultant for the US Department of Energy, said Russia does not have the technology or expertise to fully exploit old fields or difficult fields located offshore or in Siberia. Neither did China, which could have been a potential source if it had, Vatansever said.

If all the oil service companies had left, he said, it would have hurt Russian production more than the departure of oil producers. Russian oil companies can still find a market for their crude without the majors buying it. But Vatansever said production would have dropped significantly without the equipment and expertise of American companies.

Zagrebelska said SLB benefited from the departure of its rivals, with revenue up 25% in the third quarter of 2022 compared to the previous quarter and the company hired 70 new employees at the end of the year, including on the accounts of Russian fossil fuel giants Gazprom and Rosneft. Company filings show Russian business increased slightly for SLB through 2022, to 6% of overall revenue from 5% in 2021.

SLB’s Bliss said the company’s workforce had actually fallen by 10% since the invasion and that the rise in Russian revenue was due to normal market fluctuations.


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