Pensioners face £620m shortfall as Russia seizes BP’s Rosneft shares

Pensioners face a £620m raid on their pension dividends as Russia prepares to seize a payment for BP amid a crackdown on financial transactions to "unfriendly states".

REUTERS/Sergei Karpukhin rosneft russia - REUTERS/Sergei Karpukhin

Russian energy giant Rosneft said it will pay out a record full-year dividend of £5.5bn to investors after its profits jumped on the back of rising commodity prices.

It is understood BP does not expect to benefit from its 20pc stake in the company, however, after Vladimir Putin launched a crackdown on distributions to Western countries and their allies.

The Bank of Russia first banned companies from paying dividends to overseas shareholders in March, while the Russian government later signed a decree blocking payments to entities from countries committing "unfriendly actions" against the state. 

Britain has been added to the list of banned states alongside the US, the EU, Switzerland, Norward, Australia and others.

BP made its investment in Rosneft in 2003 and has since received dividends worth around £15bn. British pensioners have benefitted from the income as BP is one of the top dividend payers on the FTSE 100.  

It came under pressure to abandon its shareholding shortly after Putin's invasion of Ukraine.

Bernard Looney, BP's chief executive, was quizzed on his plans for the stake in Rosneft by Business Secretary Kwasi Kwarteng following the outbreak of conflict. The British oil major then announced it was abandoning the stake and giving up its two seats on Rosneft's board.

However, BP has not offloaded its shareholding in Rosneft, instead writing down the value of the stake and treating it as a financial asset with no expected income.

Russia's decree orders companies to pay dividends exceeding 10 million roubles (£123,909) into a bank account set up in the name of the sanctioned foreign entity. Rosneft will not need BP's consent to establish the bank account in its name.

The funds in these so-called "type C" accounts can then be used for paying taxes, buying Russian government debt, or paying fees levied by the Russian government. 

Rosneft paved the way for a bumper dividend when it announced record income of $11.9bn (£9.4bn) shortly before the conflict.

A BP spokesman said: "We've seen the announcement made today by Rosneft regarding dividend payments. 

"We're monitoring the situation but have no further comment on this. We are continuing to pursue our exit from the Rosneft shareholding.”

Reference: The Telegraph: Helen Cahill